World premiere in Germany: The Berlin fundraising platform Neufund has announced the date for the world’s first equity token offering (ETO). On 27 November, investors can buy shares in the company Fifth Force – if they can afford it.
Initial Coin Offerings (ICOs) offer companies an attractive way to achieve an immense reach for fundraising with relatively little effort. Due to numerous regulatory uncertainties, however, many companies (allegedly even a silent majority) are still reluctant to carry out an ICO. The fundraising platform Neufund enables the acquisition of legally binding company shares in the form of tokens for the first time at the end of November. The Equity Token Offering (ETO) is the first of its kind worldwide and promises greater legal certainty than ICOs.
The operating company of Neufund, Fifth Force GmbH, may serve as guinea pigs. From 27 November, interested investors will have one week to be whitelisted for the ETO. The subsequent public sale is scheduled for seven days and ends on 15 December. This was announced by Neufund on his blog on 20 November. New-found CEO and co-founder Zoe Adamovicz is correspondingly euphoric:
More than a year ago, we announced our first legally binding offer from Tokenized Equity on the blockchain in 2018, and we are sticking to this plan. The first ETO will be the ultimate showcase for our product,
Adamovicz said in the note.
High entry threshold – thanks to BaFin
BaFin (Bundesamt für Finanzen) is the German federal tax agency and thanks to them anyone who’s wishing to participate in the ETO must have the appropriate changepurse. Contrary to New Fund’s claim to make investments accessible to everyone, the minimum investment amount for the ETO is 100,000 euros.
Neufund shows whether this decision is contrite – and blames BaFin:
The platform of Neufund is ready to carry out the ETO 2018 as promised, but with the unexpected request of the BaFin we have to raise the minimum ticket size for this ETO to 100. 000 Euro – so we do not have to wait any longer to show you our product.
The „inquiry“;, to which Neufund refers, means a request of the BaFin, which demanded from Neufund „in the last minute“; an audit of the own technology. Newfoundland lets it shine through that one was coldly caught by this decision:
Such an application has no legal basis either in the existing regulation or in the guidelines of the BaFin and has never before been addressed in the context of our dialogue
The high minimum deposit underpins the regulatory authority’s attempt to keep small investors out of the crypto market as far as possible. It is also questionable whether Neufund did not in fact expect such a request. A company that claims to merge the worlds of crypto currencies and equity transactions by blockchain should not be surprised if the highest securities supervisory authority keeps a close eye on it.
Clear legal situation
The legal situation for public ETOs in Germany is clear, although not progressive. The same rules apply to ETO tokens that receive the mandatory security classification as securities as apply to securities. These include the obligation to publish a prospectus, ad hoc reporting obligations, organisational and behavioural obligations, regulations prohibiting market manipulation, regulations prohibiting insider dealing and the Market Abuse Ordinance.
Further details on the ETO will be announced at the start of the whitelisting phase on 27 November.