Tether Considers Tokenizing Equity Amid $20B Fundraising

Tether, the well-known stablecoin issuer, is currently contemplating a groundbreaking move to tokenize its equity as part of its efforts to raise $20 billion in new capital. This strategic initiative aims to allow existing shareholders the opportunity to exit prior to the company's Initial Public Offering (IPO). Some shareholders have shown interest in divesting their stakes at a significant discount to the envisioned company valuation of $500 billion. This move comes in response to growing shareholder demand for liquidity amid uncertainty over the IPO timeline.

Challenges and Opportunities in the Secondary Market

As reported by Bloomberg, Tether is actively addressing potential disruptions caused by secondary sales that threaten its valuation. The company has intervened to halt premature sales by stakeholders who nearly sold their shares at a valuation hitting as low as $280 billion, starkly contrasting their $500 billion target. To mitigate such risks, Tether is exploring several alternatives, including equity tokenization and potential share buybacks. Notably, the stablecoin issuer owns Hadron, a platform capable of executing tokenization, offering a promising avenue to facilitate controlled shareholder exits.

Regulatory Approval and Future Prospects

On the regulatory front, Tether's plans are bolstered by a recent no-action letter from the U.S. Securities and Exchange Commission (SEC) to the Depository Trust Company (DTC). This decision allows the DTC to tokenize traditional securities in a pilot program covering a range of financial instruments. This regulatory endorsement is a testament to the SEC's supportive stance towards blockchain technology and its potential role in the markets. Nonetheless, while the SEC remains favorable towards public securities tokenization, its approach to private equity, such as Tether's, continues to be less clear. SEC Commissioner Hester Pierce emphasized this development as a step towards more integrated blockchain-based markets.

Source: Source: Tether Considers Tokenizing Equity As It Seeks $20 Billion in Fundraising, The Market Periodical.