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🏆 The Holy Grail
Arbitrage opportunities for tokenized stocks & what is Republic going to do with its $150M?!
Jonah Schulman
October 25, 2021
Security Token Market is tokenizing! After week 2 of the Test The Waters campaign, we have received $2M+ in pledges from 350+ investors from 18 different countries and 6continents!
🇪🇸🇯🇵🇺🇸🇰🇷🇨🇦🇦🇺🇵🇭🇨🇳🇵🇱🇦🇹🇷🇼🇬🇧🇻🇪🇰🇪🇦🇪🇳🇬🇫🇷🇧🇷
Gooood morning, Rainmakers!
As always, I have two captivating topics for you to dive into:
1️⃣ Tokenized stocks arbitrage opportunity: The STM analyst team may have identified the holy grail of our industry - an arbitrage opportunity for tokenized stocks! Read along to see how you can capitalize on it!
2️⃣ Republic making money moves: Republic just raised $150M, but what the heck are they going to do with all of this cash?!
Without further ado, it's time to…
Get liquid 💧
💹 Tokenized stocks arbitrage opportunity
Being at the forefront of the capital markets, we at Security Token Market are always on the hunt to find investment opportunities that produce alpha before the masses do.
Unfortunately, when the masses discover arbitrage opportunities, it's usually too late.
Well, be grateful you are reading this because our rockstar analysts, Sam Sachs & Aneesh Shinkre, may have potentially identified the holy grail in their tokenized stock arbitrage report:
After reading their report, I sure felt like Dwight.
So, what are tokenized stocks and how can you capitalize on this opportunity?
First, let's flashback to one of my OG newsletters and break down tokenized stocks!
This is how it works (I am using Apple for the sake of an easy example):
CM-Equity AG, a German-based asset management firm owned a bunch of Apple stock
They created a fund that exclusively owned the Apple stock
Digital Assets AG tokenized the fund to break it up into shares
The shares represent the value of the fund, so indirectly you own Apple stock via the tokenized stock
“But Jonah, I can buy Apple on Robinhood, why would I buy the tokenized version?”
That's a phenomenal question, and fortunately, I have an answer for you:
Current stock market pitfalls:
T+2 Settlement: This means that when you sell your stock position, it takes 2 business days for you to receive the proceeds of the sale
Limited access: Difficult for non-us investors to invest in the US public stock market
Restricted trading hours: Normal trading hours are 9:30 AM to 4 PM EST
Tokenized stock benefits:
Instantaneous Settlement: Receive your proceeds from the sale virtually instantaneously
Global Access: Many jurisdictions can invest more swiftly
24/7 trading hours: Trade at 3 AM if you feel the need
The main difference: Tokenized stocks do not represent ownership of the underlying company but are merely derivatives of the underlying company on blockchain
You may have noticed I highlighted the trading hours in red.
That was intentional!
Due to the fact they trade on different schedules, there are going to be price discrepancies between the tokenized and non-tokenized stocks.
Here is a graph showcasing this:
There are two ways to capitalize on this arbitrage opportunity:
1. In the first circle, we see that NASDAQ’s $AAPL is more expensive than FTX’s. One could purchase the shares on FTX and sell when it reached the price of NASDAQ’s. This could secure >$1 per share of the profit if timed correctly.
2. One can also, according to FTX, redeem FTX shares for the actual underlying stock — thereby owning a physical share of any stock desired!
As you can see, there is a clear arbitrage opportunity for anyone to take advantage of - the key is being aware of it before Wall Street and institutional investors sweep it up.
Stay tuned for the next arbitrage report from the analyst team!
💰Republic making money moves
Does Republic have the potential to be a leading security token ecosystem player?
For those of you who don't know, Republic is essentially a crowdfunding portal for businesses to raise capital.
You can think of it as a similar platform to Kickstarter, except the money contributed is not just for supporting the company but it's for actual equity ownership!
According to their website, Republic has facilitated over $250 million in investments from over one million global community members.
This past week, they announced the closure of their Series B with $150M raised led by Valor Equity Partners!
The question remains, what the heck are they going to do with the funds?
Well, for the past several years, they have cultivated a leading platform for investors and companies to converge.
With the onset of tokenization and security tokens, there's one final piece of the puzzle that Republic is missing, in order to become the next best security token ecosystem player...
A secondary liquidity exchange.
I am not sure why Kendrick would say there aren't exchanges that can facilitate the secondary trading of security tokens in the US when I can think of multiple.
If he is referring to exchanges similar to a NYSE then yes, he is accurate, otherwise, it will be interesting which route Republic chooses.
Regardless, the opportunity is massive.
None of the offerings on Republic have access to secondary liquidity, but through a partnership or via the development of their own exchange... this industry is about to heat up quickly with hundreds of private companies ready to get liquid!
Stay tuned!
💦 What else is Drippin’
FTX Raises $420M in Series B-1 Fundraising Round: Just when you thought FTX was done making noise, think again!
tZERO Receives Approval For Clearing and Settlement on Its Platform: tZERO no longer has to rely on a third party for clearing and settlement. T+0 is looking more and more plausible!
SPiCE VC Commences Trading on Securitize Markets: SPiCE is a VC firm providing exposure to the tokenization ecosystem.
✍️ 📹 Content from the team
Thanks for tuning in! Keep an eye out each Monday for the next security token adventure 🧗♀️
If you haven't already, join our Discord to join the discussion!
Everything in this report is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.
Disclosures:
• No money or other consideration is being solicited, and if sent in response, will not be accepted;
• No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary (funding portal or broker-dealer); and
• A person’s indication of interest includes no obligation or commitment of any kind.