Equity Tokenization

Equity tokenization refers to the conversion of shares from companies not listed on stock exchanges into digital tokens on the blockchain. This process revolutionizes the way equity is managed, sold, and purchased, offering a host of advantages over traditional methods.

Benefits

• Limited liquidity for shares of unlisted companies

• Bureaucratic and time-consuming transfer processes

• High operational and transaction costs

• Restricted access to qualified or institutional investors

• Lack of transparency in ownership and transaction processes

• Challenges in conducting audits and ensuring compliance

• Geographic and regulatory barriers for international investors

• Dependence on financial intermediaries like banks and brokerages

• Restrictions on participation for small investors in the private company stock market

• Complexity and inefficiency in managing cap tables and shareholder rights

Opportunity for Investors

Equity tokenization opens new opportunities for investors by facilitating access to investments in private companies with greater liquidity and transparency. This allows for the participation of a broader spectrum of investors, overcoming traditional barriers such as high minimum investment amounts or geographical restrictions, democratizing access to the capital of emerging and innovative companies.

Practical Example

Consider an emerging technology company that opts to tokenize its shares and decides to sell 10% of its equity in this manner. Instead of seeking financing through traditional channels, the company offers these equity tokens on a tokenization platform like uBits Capital. Investors worldwide can purchase these tokens, securing equity rights proportional to the number of tokens they hold. These tokens can later be traded on secondary markets, providing holders with the flexibility to liquidate their stakes more swiftly and efficiently than conventional methods would allow. The transparent and auditable nature of the blockchain ensures that all transactions are securely and accessibly recorded, increasing trust in the process and promoting greater financial inclusion.