Blockchain tech solution to IPO decline, says former NASDAQ exec

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Blockchain tech solution to IPO decline, says former NASDAQ exec

A former vice-chairman for Nasdaq, David Weild witnessed first-hand the many obstacles companies faced when going public. Wanting to rectify this situation, he authored a paper in 2010 that instigated the Jumpstart our Business Startups (JOBS) Act.

Designed to help companies go public, President Barack Obama signed the JOBS Act into law in 2012. Since then, however, the JOBS Act has generated very few initial public offerings (IPOs). 

Today, Weild is proposing a second JOBS Act, one that provides for the legal issuance of shares via the blockchain.

Blockchain a solution to IPO decline?

Weild’s 2010 research paper blamed the IPO decline on “Loss of aftermarket support for new issues, including continuous marketing.”

As a result, ‘going public’ became far less profitable than expected.  

Speaking to CoinDesk about the challenges that companies face in the IPO process, Wield argued:

“These small-cap offerings require intermediaries that are adequately compensated to find the other side of the trade, and when you deprive that marketplace of the oxygen that’s required to sustain it, you end up with an erosion of the entire ecosystem of support providers.”

Fmr NASDAQ exec and CEO of Weild & Co, David Weild IV (Twitter)
Fmr NASDAQ exec and CEO of Weild & Co, David Weild IV (Twitter)

Weild believes the solution resides in tokenizing securities and moving them to a blockchain.

“Today trusted, third-party intermediaries have provided the requisite credibility in these marketplaces. That gets moved to the blockchain, so the intermediaries, the trusted banks, are no longer needed.”

And to facilitate a second JOBS Act, Weild has assembled 14 blockchain and cryptocurrency clients ready to help make his idea a reality.

Among them is Gibraltar-based INX, which recently filed initial public offering paperwork with the SEC.

In an effort to raise $130 million, the company is selling security tokens in small investment sizes (as small as $1000). 

ICOs struck down as a solution

Last year, Weild was advising two blockchain startups (Kochava and Templum) heavily involved with crypto tokens created out of initial coin offerings (ICOs). 

Both had been seeking to take advantage of Reg D 506 (c) of the JOBS Act which, at the time, allowed token sales to be advertised to various outlets.

To stay on the right side of the SEC, token sales were conducted using the SAFT framework.

Since then, the SEC has come to view ICOs strictly as securities.  As a result, Weild had to change his model for capital raises.

While somewhat problematic for his clients, Weild told Forbes that he views the ruling as the right approach. 

“You have to respect regulation, and you can’t engage in wishful thinking. There’s been an inordinate number of people that have engaged in an awful lot of wishful thinking and the fear-mongering of pointing to other jurisdictions that have much less at stake.”

As the largest capital market in the world, David Weild believes the United States has to get token regulation just right.

Unlike Malta or Switzerland, he argues, the U.S. does not have the luxury of being aggressive with regulation.

Smaller countries can afford to because much of the money coming to them comes from outside countries.