What is a reverse ICO? In a nutshell: Established Company + ICO = Reverse ICO
Initial coin offerings and tokenomic modeling are maturing, evolving, and expanding into new domains. With the emergence of the Reverse ICO, we are seeing the initial coin offering move from a pure fundraising play to a new way to run an established business with a democratised system of self-governance that aligns incentives between company owners, customers, and other parties.
A reverse ICO can also help a company sell debt or otherwise raise funds to expand its existing operations. So, whereas the traditional ICO fundraising model is used to kickstart a startup, a reverse ICO is done by an established company endowed with a tenure of success for one or both of two reasons:
- The company wants to move or transition its centralised customer operations onto a decentralised tokenomic platform.
- The company wants to use the ICO crowdfunding model to raise capital for expansion or payment of debt.
As reverse ICO issuers position their companies to benefit from the token economy, there may be profound implications for stock ownership, IPOs, and stock markets at large. Telegram’s reverse ICO raised $1.7 billion from private investors before the ICO ever went to a public token sale.
Companies in industries ripe for blockchain disruption may be the first to offer a tokenised version of their own platform. For example, it is easy to imagine Western Union creating a tradeable token for the transmittal of cross-border payments on its own blockchain.
Compared with an IPO, a Reverse ICO is logistically, legally, and regulatorily less complicated. A Reverse ICO gives a company the option to unwind the complexities of an IPO and its expensive and unwieldy intermediary transactional difficulties. Moreover, it confers superior liquidity and a potential for higher company valuation.
Reverse ICO investors receive an enhanced value proposition by virtue of an already established team of professionals who are already working together successfully on a real-world customer-driven product or service. The Reverse ICO issuing company is harnessing blockchain technology to expand its already proven capabilities. The markedly increased likelihood of an extended period of post-Reverse-ICO company solvency will likely broaden the ICO market landscape and bring in a larger and more diverse set of participants. Token holders share in the revenue upside while gaining the ability to liquidate quickly.
ICO Malta can help your business embrace the power of decentralisation with Reverse ICO consulting, operational guidance, and legal advisory. We can structure your Reverse ICO so that regular stock can be bought back from stockholders and reissued as tokens through a series of well-timed ICO token issuance phases. ICO Malta can program compliance and regulatory checks inside your token at a lower cost than what you would otherwise incur with accountants, lawyers, and KYC/AML processing.
We can develop Reverse-ICO-issued token ownership with smart contracts that add preferences, clauses, and a set of token holder rights ranging from highly limited to myriad. ICO Malta can setup your Reverse ICO to issue preferred, common, or a new and innovative class of equity that best suits your needs. We can create a user-governed experience with rights and privileges that are impossible to grant in a traditional equity offering.
ICO Malta provides operational analysis to help you gauge the suitability of a Reverse ICO for your company, including a Reverse ICO viability assay and a close examination of expected gains. If you are a private equity investor, ICO Malta can help you identify winning Reverse ICO exit strategies for companies in your portfolio.
A Reverse ICO-issued token will hold value only if it intrinsically built into a business use case. So ICO Malta’s analysis of your company’s case for launching a Reverse ICO must show that it will transform both your company’s financial structure and its business model in ways that are fundamentally advantageous.