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Gift Off Tokens: the first equity token

Gift Off is a UK based e-commerce site that operates giftoff.com, enabling users to buy digital gift cards using credit cards and bitcoin.

Gift Off has just announced that they are going to do an equity token sale (tokens.giftoff.com) offering part ownership of the company in the form of an ERC20 token. This would be the first security token representing equity in a single company.

How will the token sale work? Gift Off is seeking to raise £1.25m, at a pre-money valuation of £4m. A Singapore based token issuer will own up to 24% of Gift Off, depending on amount raised. The issuer will issue tokens, which contractually represent a financial interest in the Gift Off shares. Token holders will have a right to dividends issued by Gift Off and a right to any proceeds from a partial or full sale of any of the Gift Off shares owned by the token issuer. In addition, the token issuer has been structured to prevent it from undertaking any other activities and requiring it to put the financial interests of Token Holders first in all circumstances.

A single company equity token is something no other issuer has attempted, with most security tokens to date being collective investment schemes. If the token sale is successful then it has potentially dramatic implications for the ICO market. This structure would imply the ability to tokenise the shares of any small or medium sized private company in existence. Equity tokens give us the possibility of addressing the small company funding gap globally, cutting out platforms and walled gardens. Beyond that anything it would allow the tokenisation of anything that can be owned by a private limited company: real estate, physical commodities, or any other asset.

Most tokens currently being issued essentially offer token buyers nothing of substance. Broadly most “utility” tokens represent at best loosely defined rights to future network access or future membership schemes. At worst they give token holders basically nothing.  Almost all of them are, or would be securities, if held to the existing legal standard in the US and other jurisdictions. Most issuers are dissembling when they claim this is not the case.

By contrast with this equity token sale we see tokens being issued that would actually constitute a valuable asset for token holders and seek to protect and preserve their rights. Eventually we can expect a further step forward enabling us to dispense with legacy corporate structures and geographical jurisdictions entirely, and issue equity on new decentralized protocols such as Aragon, giving investors full ownership rights and complete governance. In the meantime, this is an innovative attempt to level the playing field, and make capital raising for small companies globally fairer, more global and based on crypto.

 

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