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Initial Exchange Offering (IEO): Latest Trend in Fintech or Substitute of IPO?

Disclaimer: This is a guest post

A substitute to IPO seems to be appearing on the horizon- Initial Exchange Offerings (IEO). IEO is considered as an advanced form of ICOs. If a project opts for Initial Coin Offering (ICO), the listing of the respective tokens on any exchange may be deferred by quite a few months subsequent to the conclusion of the token sale. On the other hand, the chosen cryptocurrency exchange is originally a very crucial partner of the project, in the case of IEO.

What is an Initial Public Offering (IPO)?

An Initial Public Offering (IPO) is defined as a method of raising growth capital by releasing shares of a private company to the public by doing a new stock release. It is to be noted that releasing public shares lets a corporation raise fresh growth capital from public investors. The changeover from a private corporation to a public corporation is considered as a very crucial period for private investors to fetch wholesome gains from their investment as it characteristically includes share premiums for existing investors. Furthermore, it gives a chance to public investors to partake in the share offering.

It is to be noted that the agreement between the cryptocurrency exchange and IEO team may comprise several conditions. They generally include hard cap, soft cap, maximum sales cap per investor, a predetermined asset price, the percentage of sales and a pre-settled amount of funds for the exchange platform, etc.

What is the Need of IEO?

The cryptocurrency domain is changing very rapidly. Over the past months, numerous investors in the crypto domain got a new instrument to invest in startups at the primary phases of growth, or in big companies with stable cash flow.

An apt example of a project doing IEO is Wolfs Group. They will be holding an IEO at the beginning of January in 2020. Wolfs Group primarily focuses on three chief areas, which are fintech, real estate, and new technologies. The first two rounds of its Initial Exchange Offering (IEO) will be held on the Coinsbit cryptocurrency exchange.

The motivation for involvement in IEO among minor companies and goliaths are distinct. Minor startups that beforehand tried to raise funds through ICO may be interested due to a number of motives. For instance, there is no necessity to develop a smart contract. The project gets supplementary advertising among the customers of the cryptocurrency exchange on which the ICO is being conducted IEO. The ability to entice original investment in a petite time and evaluate the requirement of the project in the market.

Difference Between IEO and ICO

Instead of the typical Initial Coin Offering (ICO), where investors send funds to a smart contract, an IEO participant needs to register on the specific crypto exchange, transfer funds to the account and after starting the token sale, purchase tokens from the crypto exchange on which token sale is listed.

In the last couple of months, several crypto projects shifted public token offering to private token offerings. Notably, private coin offerings were originally available only to large investors, in before the downfall of ICOs. IEO decentralizes the process of investing in virtual currencies, making it accessible to an extensive array of partakers.

What do you think about Initial Exchange Offerings (IEO)- the latest emerging trend in financial bourses? Please share your opinion in the comments section below!

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