Search results

1 – 10 of 148
To view the access options for this content please click here
Article
Publication date: 3 April 2019

Thomas Heine Felix and Henk von Eije

The purpose of this paper is to analyze underpricing in initial coin offerings (ICO). It bridges the gap between findings in initial public offering (IPO) literature and…

Abstract

Purpose

The purpose of this paper is to analyze underpricing in initial coin offerings (ICO). It bridges the gap between findings in initial public offering (IPO) literature and empirical results from ICOs.

Design/methodology/approach

The sample set consists of 279 ICOs between April 2013 and January 2018. A regression analysis is performed with data from the ICOs.

Findings

The results show an average level of underpricing of ICOs of 123 percent in the USA and 97 percent in the other countries. The results for the US ICOs are significantly higher than for US IPOs on average and also higher than US IPOs at the beginning of the dot.com bubble. The authors also study the determinants of ICO underpricing. The authors use proxies based on asymmetric information from the IPO literature as well as ICO-related variables. First-day trading volume and a good sentiment on the ICO market go together with more ICO underpricing. Moreover, hot markets make first-day investors to benefit less. Finally, companies that use a large issue size or a pre-ICO (a sale of cryptocurrencies before the ICO) leave less money on the table.

Research limitations/implications

A first restriction is that the authors focus on ICOs and not on crowdfunding, though there are similarities in that both of them are novel ways to finance projects. A second restriction is that the authors had to decide on the definition of a listing day. Cryptocurrencies are traded on many exchanges, and if the exchange is tailored to the cryptocurrency itself, the data on, e.g., close prices are not necessarily to be trusted. The authors, therefore, decided to use close price data from coinmarketcap.com, which requires a listing on two exchanges. This choice implies that there may have been trades before the listing day itself. A third restriction arises from the relative newness of the ICO phenomenon. The authors gathered data on underpricing from coinmarketcap.com and combined that with project information from icobench.com. However, the data were not simply matched and they required manual adjustments based on several other sources. The authors hope that in due time data on ICOs will be as adequate as data on IPOs and that they become more readily available. It might help if regulators or the crypto community would institute publication requirements. Adherence to such requirements would also reduce the extent of fraud and of asymmetric information, so that solid issuers with good projects might benefit from less underpricing.

Practical implications

The research may help in reducing underpricing, as the authors find that issuers can reduce it by holding a pre-ICO and by considering larger issue sizes. If they do so, investors will get fewer opportunities to benefit from underpricing. Investors can, nevertheless, also profit from the knowledge generated in this paper. When market sentiment is positive and first-day trading volume is expected to be high, investing in ICOs is likely to give them higher first-day returns. Finally, the authors hope that this paper will serve as a basis for further research into the exciting and dynamic world of cryptocurrencies.

Originality/value

There is hardly any research on underpricing of ICOs. The paper is interesting for its table with a brief comparison of ICOs and IPOs. It also searches for variables from the asymmetric information theory behind IPOs to be applied in explaining ICOs. It shows high levels of ICO underpricing in comparison to IPOs. It also gives suggestions for issuers of (and investors in) ICOs.

Details

Managerial Finance, vol. 45 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 3 June 2021

Ana Brochado and Michael Louis Troilo

The purpose of this paper is to identify the main insights current literature offers regarding initial coin offerings (ICOs) and the avenues for future research.

Abstract

Purpose

The purpose of this paper is to identify the main insights current literature offers regarding initial coin offerings (ICOs) and the avenues for future research.

Design/methodology/approach

The approach consists of a systematic literature review of 130 papers from the SCOPUS database published in English between January 2018 and December 2020, with supplemental semantic analysis of the abstracts to obtain key themes and concepts.

Findings

Regulation and the determinants of ICO success are the main themes for current research and represent fruitful areas of continued scholarship. The research agenda in ICOs is just beginning and several topics and questions merit future inquiry: the behaviour of issuers and investors, the importance of human capital, the role of intermediaries and infomediaries and the use of signalling.

Originality/value

To the knowledge, this is one of the first systematic studies of current literature in ICOs. It provides a roadmap for future work on a phenomenon that will only grow in significance.

Details

Digital Policy, Regulation and Governance, vol. 23 no. 2
Type: Research Article
ISSN: 2398-5038

Keywords

To view the access options for this content please click here
Article
Publication date: 8 May 2018

Anthony R.G. Nolan, Edward T. Dartley, Mary Burke Baker, John ReVeal and Judith E. Rinearson

To describe several key legal and regulatory considerations for initial coin offering (ICO) issuers and investors seeking to navigate some of the regulatory waters in the…

Abstract

Purpose

To describe several key legal and regulatory considerations for initial coin offering (ICO) issuers and investors seeking to navigate some of the regulatory waters in the rapidly developing space of Bitcoin, Ether, and other cryptocurrencies.

Design/methodology/approach

Explains securities law, commodities law, tax and anti-money laundering considerations. Introduces the SAFT (Simple Agreement for Future Tokens) and provides a future outlook.

Findings

The dramatic rise in value of Bitcoin, Ether, and other cryptocurrencies in 2017 generated great interest in initial coin offerings as a new form of financing on the part of both investors and companies seeking to raise funds. At the same time, ICOs raise a myriad of complex legal issues in a rapidly evolving regulatory environment in the United States and around the world. Recent regulatory actions make it more likely that most ICOs will be considered to be securities offerings.

Originality/value

Practical guidance from experienced finance, investment management, consumer financial service, tax, and payment systems lawyers.

To view the access options for this content please click here
Article
Publication date: 13 August 2019

Victor Dostov, Pavel Shust, Anna Leonova and Svetlana Krivoruchko

The purpose of the paper is to explore the initial coin offering (ICO) statements as “soft law” instrument used to regulate disruptive innovations.

Abstract

Purpose

The purpose of the paper is to explore the initial coin offering (ICO) statements as “soft law” instrument used to regulate disruptive innovations.

Design/methodology/approach

The research is based on the qualitative content analysis of 40 ICO statements issued by regulators in 37 countries by applying a custom-made coding table.

Findings

The research shows that “soft law” is used predominantly by high-capacity jurisdictions. “Soft law” allows for more flexibility and less technological and business neutrality. The findings also show the contradiction between empirical evidence and public sentiment: it seems that the widespread notion that virtual currencies have connotations with money laundering/financing of terrorism (ML/FT) is not shared by the regulators, who are more concerned by the fraud. Finally, it was found that the standard-setting bodies are lagging behind in providing guidance on the emergence technologies.

Research limitations/implications

The content analysis is based on 40 statements, which is a limited set of data. The method might be subject to interpersonal bias, although arrangements were made to ensure the uniformity of coding process.

Practical implications

The findings imply that soft law is an attractive risk-mitigation tool when the object of regulation is still evolving but the risks are present. Soft law also might contradict with the “technology and business neutrality” principle which requires further research. Finally, the findings show the need for more active involvement of the standard setting bodies.

Originality/value

This is the first in-depth research of the ICO-related statements as “soft law” instruments. It also offers a new perspective on the issue of financial innovations regulation.

Details

Digital Policy, Regulation and Governance, vol. 21 no. 5
Type: Research Article
ISSN: 2398-5038

Keywords

To view the access options for this content please click here
Article
Publication date: 19 July 2019

Mohammad Hashemi Joo, Yuka Nishikawa and Krishnan Dandapani

The purpose of this paper is to recognize the benefits of the initial coin offering (ICO) as a way of raising funds and to present a detailed comparison between the ICO

Abstract

Purpose

The purpose of this paper is to recognize the benefits of the initial coin offering (ICO) as a way of raising funds and to present a detailed comparison between the ICO and the initial public offering to realize the future possibilities that this new funding method holds.

Design/methodology/approach

It is an exhaustive review of the ICO, the mechanism of crowdfunding, the blockchain technology behind it, benefits and current shortcomings of the ICO, and the potential future development of the ICO as a convenient and efficient way of raising capital.

Findings

ICOs have brought billions of dollars of funding to startups and projects worldwide in less than two years. Concurrently, many successful ICOs yielded extremely high returns to investors and believers of this new way of funding businesses.

Research limitations/implications

While the ICO is a revolutionary vehicle for business funding, it has raised concerns among users as well as potential investors about its risk and lack of regulation. The future of this innovative funding method highly depends on further development and placement of appropriate regulatory supervision, better understanding of risk and benefits and attaining the confidence of users.

Originality/value

This is a review of the advantages and drawbacks of the ICO. If the current fraud, market and cybersecurity risks can be mitigated and standardized regulations are developed, the ICO has a future to become an established way of capital funding or even replace the existing options, regardless of the size and age of companies.

Details

Managerial Finance, vol. 46 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Book part
Publication date: 26 November 2020

Tatjana Horvat and Vito Bobek

Save Ideas Ltd is an Australia-based company and Internet portal for free and instant double protection of intellectual property (ideas of innovators and anyone), one with…

Abstract

Save Ideas Ltd is an Australia-based company and Internet portal for free and instant double protection of intellectual property (ideas of innovators and anyone), one with the Time Certificate stamp and another one based on blockchain technology. Blockchain protection is being upgraded by Initial Coin Offering (ICO) with process of issuing own crypto tokens for the expansion of Save Ideas and at the same time for funding the most promising registered ideas. Process of ICO as the way of financing will be presented in the case of Save Ideas in this chapter.

Details

Managing Customer Experiences in an Omnichannel World: Melody of Online and Offline Environments in the Customer Journey
Type: Book
ISBN: 978-1-80043-389-2

Keywords

To view the access options for this content please click here
Article
Publication date: 8 May 2018

Jeremy I. Senderowicz, K. Susan Grafton, Timothy Spangler, Kristopher D. Brown and Andrew J. Schaffer

To explain the recent determination by the US Securities and Exchange Commission (SEC) with respect to so-called “token sales” or “initial coin offerings” (ICOs) that some…

Abstract

Purpose

To explain the recent determination by the US Securities and Exchange Commission (SEC) with respect to so-called “token sales” or “initial coin offerings” (ICOs) that some tokens may be securities under federal securities laws and to address other recent actions by the SEC with respect to ICOs.

Design/methodology/approach

Reviews the SEC’s determination that some tokens issued in an ICO may be securities under federal securities laws as outlined by the SEC’s Division of Enforcement in a “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO.” Provides overview of SEC Investor Alert, Investor Bulletin, and recent comments and actions of the Staff regarding investment in ICOs and provides guidance to those interested in participating in an ICO as an investor or issuer.

Findings

These actions by the SEC make it clear that the SEC is closely monitoring the market for ICOs, and that it wants potential investors and issuers to be aware that it is watching and may take action if it believes the securities laws have been violated.

Originality/value

Practical overview of recent developments and guidance from experienced securities and financial services lawyers.

Details

Journal of Investment Compliance, vol. 19 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

To view the access options for this content please click here
Article
Publication date: 23 July 2019

Daniel Hawke

To explain a February 20, 2019 US Securities and Exchange Commission (SEC) settled enforcement action against Gladius Network LLC for failing to register an initial coin

Abstract

Purpose

To explain a February 20, 2019 US Securities and Exchange Commission (SEC) settled enforcement action against Gladius Network LLC for failing to register an initial coin offering (ICO) under the federal securities laws, in which Gladius was able to avoid a civil penalty by self-reporting the violation and cooperating with the SEC enforcement staff.

Design/methodology/approach

Explains Gladius’ self-reporting, cooperation and remedial steps; why the SEC imposed no civil penalty on Gladius; and two similar cases the SEC instituted in July 2018 against companies that conducted unregistered ICOs, did not self-report, and were penalized. Provides analysis and conclusions.

Findings

The Gladius case offers important insight into how the SEC and its staff think about cooperation credit in resolving SEC enforcement actions and sends a clear message that self-reporting to the SEC can result in meaningful cooperation credit. In three recent cases, the Commission has made clear that once it put the industry on notice that ICOs could be securities that must be registered under the federal securities laws, a party risks enforcement action by failing to do so.

Originality/value

Expert analysis and guidance from an experienced securities lawyer who counsels clients on all manner of SEC enforcement, examination and regulatory policy matters.

To view the access options for this content please click here
Book part
Publication date: 10 December 2018

Andre Laplume

This chapter examines the implications of blockchain ventures for international business. The author highlights the advantages blockchain technologies can create for firms…

Abstract

This chapter examines the implications of blockchain ventures for international business. The author highlights the advantages blockchain technologies can create for firms seeking to access international markets for investors, customers, employees, and suppliers. Overall, the international character of initial coin offerings and their business models suggest several advantages over traditional internationalization methods.

Details

International Business in the Information and Digital Age
Type: Book
ISBN: 978-1-78756-326-1

Keywords

To view the access options for this content please click here
Article
Publication date: 2 June 2021

Wenhao Shen

To describe recent regulatory developments in China on digital renminbi (RMB), initial coin offerings (ICOs), cryptocurrency holdings, cryptocurrency exchanges and…

Downloads
166

Abstract

Purpose

To describe recent regulatory developments in China on digital renminbi (RMB), initial coin offerings (ICOs), cryptocurrency holdings, cryptocurrency exchanges and blockchain technology.

Design/methodology/approach

Describes a digital RMB pilot program, seven government agencies’ bans on ICOs and cryptocurrency exchanges, the legality of holding and trading cryptocurrencies in China and the government’s endorsement of blockchain technology.

Findings

No PRC law or regulation prohibits Chinese investors from holding or trading cryptocurrencies but Bitcoin is defined as a virtual commodity, not a currency. Despite a ban on ICOs and cryptocurrency exchanges, the People’s Bank of China (PBOC) and other government agencies endorse blockchain technology as long as its goal is to service the real economy.

Originality/value

Expert guidance from lawyer with experience in foreign investment, cross-border mergers and acquisitions, capital markets, fund formation and venture capital and private equity investments in China.

Details

Journal of Investment Compliance, vol. 22 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

1 – 10 of 148