🐳 How to Evaluate STOs — An Investor’s Perspective
5 parameters which Accredited Investors (AIs) & Qualified Institutional Buyers (QIBs) would look at:
1. Prospectus
Unlike a whitepaper, the prospectus is a legal document mandated by the SEC that provides details about the particular investment offering, including STO. The prospectus generally would comprise of information such as business details, background information, financial details, risks and the fees involved.
2. Business Model
AIs and QIBs look for evidence of a strong, healthy, thriving business and top-line growth is the best indicator. Rate of revenue growth also factors significantly into the level of interest among investors leading up to the STO, as well as the actual valuation at time of STO.
3. Cash-22 situation Cash-22 situation means that, while access to capital is one of the common reasons for doing an STO, it is possibly the worst time to do an STO when you actually need the money to continue funding the business.
4. The syndicate The ‘Syndicate’ is a temporary group of individuals or firms who might come together for the period of the STO with the intent of handling large-scale transactions, which otherwise would’ve been very difficult to manage individually.
5. Leadership & Governance Blockchain related experience might take a backseat in lieu of business experience since unlike ICOs the ability to run & steer the business is more critical than just being a technology geek. Equally important would be ‘governance’. Being under the purview of the SEC would by default call for some governance and transparency and it is not something one can circumvent at will.
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