On April 11th 2019, Blockstack announced the filing of an offering statement for a U.S. Securities and Exchange Commission (SEC) regulated $50 million token offering under the Reg A+ framework. Already, Harvard’s endowment fund— the Harvard Management Company— has been identified as both an investor and advisor in the offering.
Harvard’s Investment in Blockstack’s Token Offering Explained
The Harvard Management Company is officially backing Blockstack’s security token offering.
In the Reg A+ offering circular submitted to the SEC April 11th, Blockstack elaborated on the Harvard Management Company’s involvement:
“In connection with the sale to the QP Fund, we have formed a token advisory board, the LP Advisory Committee, the main purpose of which is to determine whether the above milestones have been met. The token advisory board consists of seven members. Three of the members, Charlie Saravia, Zavain Dar and Rodolfo Gonzalez are designees of affiliates of the Harvard Management Company, Lux Capital and Foundation Capital, respectively, limited partners of the QP Fund which have purchased an aggregate of 95,833,333 Stacks Tokens.”
The 95.8 million tokens reflect an investment of more than $11 million. Yet besides the funding, Charlie Saravia— a Blockstack token advisory board member— serves as a Managing Director of the Harvard Management Company.
As the world’s largest university-affiliated endowment fund, the Harvard Management Company has a holding value of $39.2 billion, per its 2018 report.
A Reg A+ offering allows for certain federal securities exemptions thanks to the JOBS act of 2012. Frequently referred to as a “mini-IPO”, the Reg A+ allows for up to $50 million in securities to be raised from both accredited or non-accredited investors. Securities issued under the offering will be immediately available for transfer or trade.
Notably however, the SEC will typically perform a lengthy review process prior to granting its approval.
How the Regulatory Safety Found in Security Tokens is Making Waves
Security Token Offerings (STOs) feature one major advantage when compared to its Initial Coin Offering (ICO) counterpart: regulatory compliance.
Per the words of SEC Chairman Jay Clayton, virtually every ICO constitutes a security given the commission’s Howey Test— the financial tool used to determine whether or not an asset is a security.
As a result, Clayton says issuers of digital assets must abide by the commission’s existing securities laws.
Companies have subsequently left the ICO behind and turned to the STO as a compliant means to raise capital— all the while utilizing the benefits of distributed ledger technology.
While ICOs currently raise 58 times less than they did at this time last year, STOs saw a 130% increase in Q1 2019.
For more on the benefits and overall functionality behind this emerging infrastructure of digital assets, be sure to review our security token guide.
What do you think about the Harvard Management Company investing in Blockstack’s token offering? What does this say about the current state of security tokens? We want to know what you think in the comments section below.
Image courtesy of Harvard University.