Blockchain securities are known to have excellent potential but the biggest problem that they face today is a relatively unevolved financial system. The existing financial industry is evolving too slowly to fully realize the potential of blockchain securities, considering limitations associated with public market trading and historically unclear regulations in the blockchain ecosystem. Many retail investors are sitting on the sidelines as they are unsure of investing in cryptocurrency via unregulated markets that don’t afford the investor protections afforded under securities laws. Our featured pick of the day is a company that is in the process of building the first SEC-compliant ecosystem for blockchain securities – Prometheum. The company is a private player as of date and its planned IPO appears to be an attractive opportunity for our readers at SmallCapsDaily given the growing popularity of blockchain securities and the promising business outlook of the company.
Prometheum’s subsidiary Prometheum ATS is a SEC-registered and FINRA-regulated, full-service market ecosystem for blockchain securities that aims on providing the primary issuance of registered, qualified or exempt securities, a venue for secondary trading, mechanisms for clearing and settling transactions, and monitoring custody of a customer’s digital asset securities.
Founded in 2017 by a group of Wall Street lawyers, the company intends to build the first compliant (regulated) end-to-end ecosystem for digital asset securities. Digital asset securities will trade on Prometheum’s network, where the Prometheum Blockchain Technology will track transactions for secure clearing and settlement. When a company raises capital on Prometheum’s platform, they offer their own digital asset security that can be freely traded on this ecosystem where the Prometheum Blockchain Technology tracks transactions for secure same day clearance and settlement.
The company plans to conduct its operations through wholly-owned subsidiary Prometheum ATS which will operate an alternative trading system focused on matching buy and sell orders for digital asset securities. Prometheum intends to generate revenue through the Prometheum ATS and through primary and secondary distributions digital asset securities.
First Digital Asset Securities Alternative Trading System (ATS)
In March 2021, Prometheum announced its partnership with custodian and infrastructure provider, Anchorage Digital Bank to create the first public Alternative Trading System (ATS) for digital assets. Prometheum ATS is a FINRA and SEC-regulated trading system that allows the retail public (both non accredited and accredited investors) to trade digital asset securities. Once live, Anchorage Digital Bank will custody digital assets transacted through Prometheum ATS. It is worth highlighting that this news follows a historic first as the Office of the Comptroller of the Currency (OCC) granted conditional approval in January 2021 making Anchorage Digital Bank National Association the first federally chartered digital asset bank. This designation, along with Prometheum’s ATS, will create a solid and novel regulatory foundation for supporting the first public market for digital asset securities.
The company strives to make emerging technologies accessible to the public and when its ATS goes live, the Prometheum ATS will be a full-service SEC and FINRA overseen electronic market combining both traditional and blockchain technology for the trading of digital asset securities, with on-chain custody and settlement provided by Anchorage Digital Bank. In September 2019, the company purchased a version of InteliClear’s post-trade solution technology, which provides a clearing solution currently used by numerous traditional U.S. clearing firms. Most recently, the company announced the acquisition of Manorhaven Capital LLC, a licensed broker-dealer, as well as the close of an oversubscribed funding round. Overall, the company appears to be on track to progress in its quest to build the first compliant, public ecosystem for digital asset securities.
Reg A+ Issuance Model
Prometheum’s Regulation A+ model has been created to help small and midsize companies raise capital faster, and at a lower cost than a traditional IPO. Reg A+ offerings, sometimes called “mini-IPOs,” of digital asset securities are significantly less expensive and time-consuming relative to IPOs. Moreover, companies that are a part of Prometheum’s network will use the platform to raise capital compliantly with their digital assets.
The company’s smart contracts enable Prometheum to support a high level of throughput and scalability necessary for an emerging securities market. In addition, instructions can be reconciled on the blockchain resulting in more security, redundancy, and settlement that is essentially instantaneous. The platform is designed with retail customers in mind and is focused on providing investors with protections similar to the US stock markets.
Prometheum has filed for an IPO and plans to raise $38 million by offering 6.3 million shares at $6 which in our view can be a compelling investment opportunity for our small-cap investors. In January 2021, the company closed a funding round of over $15 million led by international investors and brought the total investment in the company to over $27 million. Its past history of successful fundraises is an indicator of the high level of confidence that investors hold in its business. The management is focused on leveraging the company’s deep expertise in securities regulation and accelerating the growth of its platform by furthering the blockchain and trading technology and various other strategic growth initiatives. Despite the headwinds faced from Covid-19, the company witnessed an elevated interest in its digital asset securities which bode well for its top-line and profitability growth. Prometheum’s management expects the platform to go live in Q4of 2021 after which, it should be able to build a strong pipeline of fresh issues. To sum up, we believe that Prometheum is a rare investment opportunity in a regulated digital assets platform which should be lapped up by small cap investors.