Tokenization is not much different, but everything becomes bigger, more efficient, cheaper and promising.
One of the main motivations for a company to be interested in entering the public offering market is to raise capital, where a portion of the company’s property is sold through a share distribution to new investors.
Let’s talk about primary market and secondary market;
The Primary Market in the traditional world is the one that occurs when a company makes an Initial Public Offering of its shares, or launch of new shares on the Stock Exchange as a way to raise funds. At this initial moment, investors buy these shares directly from companies.
The tokenized Primary Market is the one that occurs when a company makes the Initial Public or Private Offering of its tokens as a way to raise funds. At this initial moment, investors buy these tokens directly from companies that own the assets, but where everything becomes more transparent because blockchain is used.
Once that happens, these “bonds” and tokens can now be traded on the so-called Secondary Market which are basically the Exchanges.
It is in this new market that investors carry out operations to exchange bonds, shares or tokens among themselves, buying directly from other shareholders who are willing to sell their tokens and no longer from issuing companies as had occurred in the Primary Market.
Trading in the traditional universe market is more common in the daily routine of the Stock Exchange, after a company goes public, its shares start to be traded daily by them. In tokenization , it is common for investors to trade within exchanges such as Binance , Coinbase , Bitso , Ftx , etc…
So far, we’ve talked about why a company decides to go public and what the founding owners (and the companies themselves) gain from it.
But what do I (Investor/Shareholder) gain from this?!
Shareholder remuneration
So far, you already know that in the traditional market, when you buy a share, you become the owner of part of the company, that is, you become a partner/shareholder. In tokenization there are still regulatory factors in Brazil that prevent companies from tokenizing their equities, but it is possible to work in this way in other countries and in a certain period if the company achieves good results generating profit from time to time, this company will distribute part of this profit. burn tokens causing what we call buy-back and burn, making all previous investors of the token have greater profits, working also as a similar and efficient distribution of dividends
What is BUY-BACK and BURN?
It is the repurchase that reduces the total number of tokens or shares outstanding in the market, and that positively impacts their price. Likewise, burning coins decreases the supply of coins on the market, increasing the value of the remaining coins.
Still on the distribution of dividends ,
In the Brazilian market, speaking of the traditional sector, Law No. 6.406/76 requires all publicly traded companies to transfer at least 25% of their net income to shareholders, if their bylaws do not determine another amount of dividend that must be equal to or greater than those 25%. In tokenization, however, it is interesting to have guarantees and ballasts, but there is no minimum for transfer. It is important to emphasize that a digital/token asset becomes more interesting when there is legal certainty and greater liquidity for its investors.
In addition to dividends, in the traditional market, the second form of benefit paid to shareholders is Interest on Equity (JCP) .
According to art. 287 of Law 6,404/76, the JCP replace the dividend in a partial or total form and it is a form of remuneration that the shareholders receive on the money invested in the company. The basic difference between them is that while the dividend represents the distribution of profits, the interest on equity represents an expense in the company’s results.
Because of this, the company usually pays part of the results in the form of JCP, as this way they receive a tax benefit on these amounts (from non-payment of IRPJ). On tokenization This form is even simpler, it can be offered with a pre-fixed term and interest on a simple project sheet which is called a white paper, and with the maximum guarantees that can be requested by the tokenizer so that the investment has greater support and security in its offer.
Last but not least, the third (and perhaps the most popular) form of shareholder remuneration is the valuation of the company and its shares (technically known as Capital Gain ). That in tokenization means the same thing and through tokens distributed in the market.
If you choose well where to invest and buy tokens from a company that can deliver robust growth over time, your money will grow and appreciate in value along with that company because, like shares, the tokens will become worth more and more. The difference is that tokens are decentralized and democratized, while actions are centralized and monopolized for the most part.