keytakeaways
Robinhood Markets said earlier this week it would offer European users the option to exchange “stock tokens” and would offer eligible investors “tokenized” stocks from two major private companies, Openai and SpaceX.
Openai denied the offering on Wednesday, saying, “These ‘Openai tokens’ are not Openai equity. We were not affiliated with, or involved in, or supported by, Robin Hood. “The company urged investors to “be careful.”
Robinhood CEO Vlad Tenev responded in an X post Wednesday night. “It’s true that it’s not technically ‘fair’ (you can see the exact dynamics in our terminology for those interested), but tokens effectively give retail investors exposure to these private assets. ” Separately, the spokesperson said the token is “enabled by indirect exposure…and by interest in Robinhood’s ownership in a special purpose vehicle.”
SpaceX CEO Elon Musk has not commented publicly on the stock token. However, he seized the opportunity to take a jab at Openai. “Your ‘fair’ is fake,” Musk replied in a company post.
If the stock tokens are not fair, what are they?
What is a Stock Token?
A stock token is effectively a blockchain equivalent to a stock. They represent transferable ownership of the company.
However, they differ from normal stock in some important ways. First, they trade on blockchain rather than public interaction. Second, rather than being held by custodians like brokerage companies, they can be stored in investors’ digital wallets. Third, they are on-chain and can be used in other decentralized finance activities such as staking.
What are the advantages of inventory tokenization?
Robinhood CEO Tenev recently appeared on Bloomberg’s “Odd Lots” podcast to make a claim to stock tokenization.
Tokenized stocks can be held directly by the investors who own them. This gives you more flexibility in trading. Stocks that are not under the control of a broker can be traded even if the broker is experiencing technical difficulties. An emergency sales order will be redirected to another broker and can be filled out.
The decentralized nature of blockchains can make inventory easier to trade 24/7. As long as the computer processes transactions on the blockchain, traders can buy and sell stocks without using exchanges or clearing houses with fixed business hours.
Finally, Tokenization allows inventory to be available to enter a secured lending pool or enter wagers, providing investors with an additional source of passive income.
Why can’t I get $5 SpaceX stocks in the US?
Robinhood launches stocks in private companies that have been tokenized in Europe due to the lack of strict rules governing private market investment.
In the US, the private market is only accessible to certified investors. In the eyes of the government, individuals and businesses with sufficient money do not require the protections gained from public market regulatory oversight.
Public companies require regular financial disclosures by the Securities and Exchange Commission to provide material business updates to the public. Private companies have more relaxed disclosure rules, as mostly certified investors are assumed to be rich or familiar enough to assume the additional risks of private investment.
Will tokenization come to the US?
During the Washington Post Operation in January, TV said opening a private market for retail investors was at the heart of Robinhood’s tokenization push. “By representing private companies’ equity, retail investors can invest in large companies early in their lifecycle before being potentially publicly available at a valuation of over $100 billion,” he writes.
There are obvious benefits to being able to invest in the hottest startups for everyday investors. Under existing rules, the great benefits arising from early investments often arise in wealthy and well-connected people. However, there are open rules to help everyday investors and their advisors make informed decisions and protect against fraud, and investment in small startups is inherently riskier than buying stocks in established public companies.
Tenev told “Odd Lots” that stock tokens could become available in the US without new laws and that Robinhood is discussing tokenization with the SEC’s Crypto Task Force. “I think they’re pretty keen to make this happen,” he said. He mentioned the rules governing tokens.
