Oddity Tech Ltd., an online beauty retailer based in New York, will offer investors a new type of security that combines traditional equities with the digital infrastructure behind after cryptocurrencies.
Oddity, which sells products through its Il Makiage and SpoiledChild brands, is offering so-called security tokens. The token converts to a share in the final initial public offering at a 20% discount from the IPO price. The company said the proceeds will be used for general corporate purposes.
However, unlike other tokens, Oddity tokens will not be tradable once they are released, the company said, a condition that will be programmed into the contracts governing them. That means investors will have to wait for the IPO to sell and receive any profits.
Security tokens are assets created and transacted like bitcoin and cryptocurrencies in that they exist entirely on digital platforms. The difference is that they are offered as managed assets and can have specific pre-programmed characteristics, such as equity ownership or profit sharing. The assets have similar characteristics to stocks and bonds.
Oddity is one of the first non-cryptocurrency-focused companies to offer such a method of security, and the first to link directly to equity ownership.
Oddity chief financial officer Lindsay Drucker Mann said security tokens could in the future become an important tool for companies looking to raise capital.
Ms. Drucker Mann said: “Security tokens can be offered through a waiver to small businesses under the Securities and Exchange Commission regulation, but most companies and issuers are not familiar with it. familiar with the process and reluctant to participate.
“It’s not going to happen unless you have bottom-up issuers and other backers doing it, working through managed channels,” she said.
The token offering is open until May 11, at which point it will set a price, similar to the process for a traditional IPO. The offering is being conducted under SEC Regulation D guidelines, which means it is a regulated offering open to accredited investors only.
The offering will be issued through a blockchain-based platform called Securification, an SEC-registered remittance agent that has been helping to grow the security token market.
While Oddity declined to comment on an IPO, media reports say the company is preparing an IPO. It has raised $130 million in venture capital, according to Crunchbase.
The concept behind security tokens emerged after the bubble of 2017 called initial coin offeringare digital tokens that are sold by companies and used to raise capital, just like a stock offering, but are not regulated or registered and do not have any ownership shares or any dividend payment.
At its peak, issuers
s had a total of $24 billion in their coffers from the token sale. But mania quickly disappeared after an SEC crackdown.
While the ICO boom quickly fell apart, the idea behind it is not dead yet. Several companies have taken the concept of ICOs and adapted it to create digital assets that will be sold in a regulated environment like other securities.
The market for these tokens is still small and largely illiquid, but growing. According to the Security Token Market website, there are less than 200 security tokens that are trading on different platforms. Some are tied to trading platforms like tZero and INX.
Others are tied to specific pieces of real estate, like the St. Regis Aspen in Colorado. A security token that provides own shares in the famous Millennium Sapphire.
A year ago, crypto exchange company INX conducted a public offering of a security token tied to the company itself. The token, which trades on the company’s exchange for security tokens, entitles holders to a 40% share of the company’s net cash flow.
The INX token started trading last July for 90 cents. It traded as high as $3.60 in September, but on Monday was back at 90 cents, according to Security Token Market.
Write to Paul Vigna at [email protected]
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