By
staff writer
March 26th, 2024
Ahead of traditional public listing, the Swarm platform enables institutional investors to reserve their stake in a fund created for the purpose of holding equity in Robinhood.
Amidst numerous perks blockchain technology has brought on the surface of modern society comes a brand-new approach to initial public offering, namely assets tokenization. Nowadays investors do not have to acquire company’s shares for rip-off prices in order to get a bit of control over the business, they can easily reap their benefits out of fractionable and mobile tokens available for trading from anywhere in the world.
Sounds very attractive, isn’t it? However, on the other side of spectrum, tokenization has an adverse effect as the rights of an issuing company can be heavily violated. An explicit victim of such kind of tokenization misuse is a fintech startup Robinhood.
Robinhood is a rapidly evolving mobile stock trading app that following a series of significant offering extensions has recently earned a $5.6 billion valuation. No wonder, company’s equity stake eventually became a sweet pie for investors seeking to multiply their fortune.
Nevertheless, Robinhood did not express any intention to declare security token offering or hold a traditional public listing, and a blockchain-based platform for private equity Swarm decided to remedy an oversight.
Through partnerships with brokers and syndicate managers, Swarm has sourced equity from former Robinhood employees looking to cash out before the firm’s eventual IPO. The equity is held by what is essentially a shell company, whose shares are then listed on the Swarm platform as SRC-20 tokens.
The ownership of the shell company is tokenized for investors whose token holdings represent fractional ownership of that entity, which in turn holds equity in Robinhood company. The platform’s native SWM token itself is used for gas, governance, and incentives on Swarm, similar to how ETH serves as gas for applications running on Ethereum.
All of this, Swarm says, can be accomplished without Robinhood’s permission — much less its willing participation. In fact, when the cryptocurrency startup first announced in June that it planned to turn Robinhood shares into cryptocurrency tokens, a Robinhood spokesperson told CCN that the firm was not even aware of Swarm. When reached for comment today, the firm provided the same statement and said that it had no further comment.
The representatives of Swarm on the opposite have a lot to say. In a statement made by CEO of Swarm Fund, Philipp Pieper shared an ambitious plan to democratize venture capital, saying:
“One of the key innovations of tokenization is that token owners can participate in the value creation of the very network they are part of. Swarm is bringing this paradigm shift to companies that are key players within this movement, but have yet to permit the network to participate.”
Further he added an explanation of the underlying concept of a Swarm mechanism:
“The first security token of its kind, once the minimum funding goal is reached a Swarm syndicate manager will form an entity using Swarm, acquire equity through established relationships with former employees and other equity holders, and convert committed funds into RHET equity tokens.”
The announcement made it clear – the Robinhood Equity Token (RHET) is the first of many tokens representing equity in private companies expected to launch on the platform. Swarm also aims to tokenize equity in other privately-owned tech companies such as Coinbase, Ripple, and Didi, though their shares have not been listed on the firm’s platform.