In the past, large companies would almost instantly go public as it proved legitimacy and offered an opportunity for the public to invest in the company. For example, Microsoft offered its share publicly in 1986 at a valuation of around $1.1 billion.

Over the past years, companies have been taking longer and longer periods before going public. To provide a short summary on the current state, I will refer to an interview that Vox conducted Scott Cuttler, the executive vice president and head of global listings at the New York Stock Exchange at the time.

Cuttler explains his view on the current state of Initial Public Offerings (IPOs). Cuttler believes that the IPO world pre-2000 is dramatically different from the world we live in now. Pre-2000, there was the model of taking companies public early.

That is no longer the case today. There are several reasons behind this change. One reason is due to several frauds such as Enron and Worldcom which eventually resulted in the Sarbanes-Oxley Act to regulate the markets. While regulations introduced safer markets, entering those markets became a more difficult and tedious process for companies.

That difficulty, combined with having easier access to private investors, made public markets less desirable and reduce the urgency the companies faced earlier to go public.

Unicorns

Unicorns are privately held companies with a valuation of $1 billion or higher. These companies create immense value for shareholders who invested in the companies. A list of those companies includes companies such as Stripe, Airbnb, SpaceX, Epic Games, and many other companies. All of the aforementioned companies are not traded on a public exchange yet despite their multi-billion dollar valuations.

The delayed listing strategy that companies are adopting puts current shareholders as well as potential investors in a tough position.

Shareholders find themselves without a viable exit plan and interested investors find themselves unable to invest in companies until those companies go public. Selling through private equity brokers is the only option, but those charge high brokerage fees in addition to the 20–40% liquidity premium already existing in the market. In other words, a middle man charging ridiculous fees (sounds familiar bankers?).

With companies adopting the delayed listing strategy, investors find themselves without a viable exit plan until the companies go public. This creates a bottleneck for current shareholders as well as potential investors. Until the company goes public, there isn't really much that can be done for any party involved.

Uber

Uber was the most recent unicorn to conduct an IPO and go public in one of the largest IPOs in recent memory. When Morgan Stanley, the lead underwriter in Uber’s IPO suggested the company was worth $120 billion, an IPO that values Uber at $75.5 billion seemed like a bargain. To their surprise, the market actually valued the company at $69 billion within less than a week of the IPO.

Uber’s delayed IPO meant that interested investors had to wait until its IPO to be able to invest in the company, but more importantly meant that shareholders had no way of exiting the investment before the company faced several scandals.

The lack of an actual market also resulted in creating an inaccurate valuation of the company by Morgan Stanley. This has resulted in viewing one of the biggest IPOs in recent history as “a failure”.

Has there been a secondary market where Uber shares are traded, this whole debacle could have been avoided. Shareholders would’ve had an earlier exit plan and liquidity options, investors would have a way in, and the valuation would have been based on actual real-world data as opposed to the inaccurate data Morgan Stanley provided.

Dusk Network and Digital Securities

Dusk Network is a privacy-oriented blockchain, with a goal to provide more than just payments. The blockchain was further developed to make zero-knowledge smart contracts feasible. this allows for a unique combination of privacy and compliance which makes Dusk Network and ideal place for the financial industry. This has helped focus the Dusk Network team to focus on the security tokens market which is in need of on a purpose-built blockchain.

One of the main focuses of Dusk Network is the aforementioned Unicorns. With the help of digital securities, it is now possible to tokenize those assets and trade them on secondary markets prior to the company going public. Shareholders can now have a viable exit option if necessary while buyers can now have a way to buy those shares and reap future benefits.

Dusk will be able to achieve this through their strong partnership network which specializes in digitizing unicorn shares. To quote it from Dusk’s Medium article:

Through a combination of Special Purpose Vehicles (SPV’s), Exchange Traded Funds (ETF’s), and our own compliant STO protocol we will be bringing these unique assets to market this year.

Reflecting this back to Uber’s IPO; If Uber’s shares were digitized prior to the IPO, shareholders could’ve had access to liquidity and a viable exit plan years earlier if needed while buyers could’ve had an opportunity to buy shares.

Uber would also have an accurate valuation prior to going public based on the secondary markets which would reduce the chances of a “failed” IPO situation. With the help of Dusk Network, Unicorns can soon reap such benefits.

Digital Securities are the future. They provide several advantages to traditional markets which makes adopting them just a matter of time. A more efficient method will always overtake traditional inefficient methods in any industry and this is no different.

Unicorn shareholders have access to secondary markets where they can sell their shares

Digital Securities introduce new ways to raise funds (STOs)

Interested buyers can invest in Unicorn projects without a need for a broker, hence cheaper

Markets available 24/7 as opposed to traditional markets timings

Digital securities introduce liquidity options that aren’t available in any other way to all parties involved

The advantages above apply to Unicorns as well as smaller companies. The ICO-mania that happened in the past few years is similar to the IPO one that happened pre-2000. Similar to the post-2000 era, the introduction of Digital Securities and regulations is inevitable. The advantages the market can achieve with the new technology are too big to be ignored which makes this transition a matter of time only.

Note: I personally own Dusk tokens and have been a fan of the project for a while, but this article is not financial advice.

Learn more about Dusk — Technology for Securities

Dusk streamlines the issuance of digital securities and automates trading compliance with the world’s first programmable and confidential securities.

Website: http://dusk.network/

Telegram: https://t.me/DuskNetwork

Reddit: https://www.reddit.com/r/dusknetwork

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