- The ICO was briefly a popular fundraising mechanism for cryptocurrency projects, until the SEC cracked down on many.
- Now Exodus is trying something it calls "the 2021 version of an ICO."
Stock trading apps like Robinhood have made millions by adding cryptocurrency purchasing to their platforms. Exodus Movement, the firm behind the popular Exodus Wallet, wants to do the reverse and get its crypto customers to buy stocks through Exodus Wallet—its own stock.
And without accepting US dollars.
The Nebraska-based crypto firm has filed with the Securities and Exchange Commission (SEC) for permission to sell $75 million in shares of the company at $27.42 a pop through a Regulation A+ offering, which opens up shares to regular retail investors (as opposed to just accredited investors). The share price is based on a $710 million valuation for the company.
Exodus wants subscribers to its offering to pay in Bitcoin, Ethereum, or the USDC stablecoin.
Within nine months after the completion of the offering, Exodus "anticipates that the shares would be represented by blockchain common stock tokens."
That sounds like an ICO, or initial coin offering, the fundraising vehicle that surged in popularity in 2017, as new blockchain projects sought to finance their operations by selling tokens that buyers could eventually use. Some, like MakerDAO, became "governance tokens" that allowed investors to vote on changes to the project. Others, such as Filecoin, were utility tokens that allowed investors to utilize the protocol’s functions. Most never went anywhere, leaving buyers with near-worthless tokens—and the SEC in 2018 cracked down on many of the firms that conducted ICOs.
But Exodus COO Sebastián Milla Goñi told Decrypt, “Think of this as the 2021 version of an ICO—compliant, transparent, and offered by a profitable company with a working product. What better loyalty token than equity? There have been other Reg A token sales but this is the first public token offering that represents Class A common stock in a company."
The advantage of ICOs for crypto startups was that it theoretically allowed them to bypass regulation and raise cash fast. The advantage for small investors was that they could get in on the ground floor on the types of investments that are usually reserved for wealthy individuals, private equity firms, and venture capitalists.
Exodus is attempting a middle ground—with SEC approval, a la Blockstack, which raised $23 million in an SEC-compliant token sale in 2019.
“We believe traditional fundraising models are fundamentally broken and favor the privileged over the public,” Exodus CEO JP Richardson says in a press release. “While raising money through a Series A was an easy option, we decided to pursue a more inclusive route that enables anybody to invest directly in Exodus.”
Of course, all of this is what the company aims to do—pending SEC approval. A legal disclosure at the bottom of the Exodus announcement warns that the announcement "may be deemed 'testing the waters' material under Regulation A under the Securities Act of 1933. We are not under any obligation to complete an offering under Regulation A. We will only be able to make sales after the SEC has qualified the offering statement that we have filed with the SEC."
If the SEC approves the sale, buyers would receive tokens representing Exodus stock in their Exodus wallets. Those shares would give buyers something ICO investors never had: legal ownership. Class A shares give holders substantial voting rights. “With Exodus equity, we ensure that owners of our shares have real skin in the game,” Goñi told Decrypt.
Exodus touts its product as an easy-to-use crypto onramp. Decrypt’s October 2020 review of the best Bitcoin wallets said it “has one of the most polished interfaces around.” Investopedia named it the best Bitcoin wallet for beginners this year.