Security Token Offerings

Abstract

Security token offerings (STOs) are not initial coin offerings (ICOs) or a subset of it. This paper shows that distinguishing STOs from ICOs is crucial for the study of entrepreneurial finance. We first provide a working definition of a security token and uncover key facts about the primary STO market using a unique STO sample. The STO activity developed after the end of the ICO market bubble. The STO market is, however, still a nascent market. STOs are geographically dispersed but concentrated in jurisdictions with accommodating securities laws. Next, we explore STO success factors. We show that various issuer and offering characteristics, traditionally used in the ICO literature, also matter for STO success. We also find that success is associated with good governance practices, consistent with the corporate finance literature. We conclude by discussing the implications of native digital securities, the next generation of security tokens, for entrepreneurial finance.

Keywords: blockchain, corporate governance, entrepreneurial finance, initial coin offering, native digital securities, securities laws, security token offering, tokenization

JEL Classification: G11, G32, G34, L26, M13