On December 26, 2018, I presented on the differences between a traditional securities offering and security token offering at an event co-hosted by Security Token Lawyers and Slice RE. Comments welcome and encouraged.

1. STO
The Next-Generation
Securities Offering
Samuel Katz, Esq.
December 26, 2018

2. What is being
Offered?

3. Lawyers
Accounting/Tax
Marketing
Technology (Issuance Platform)
Exchange
Investment Bankers
Lawyers
Traditional
Offering
Security Token
Offering
Step 1 – Gathering the Team
Accounting/Tax

4. Financial Analysis
Prepare presentation
Offering structure
(LP, C-Corp, REIT)
Draft legal documents
Traditional
and
Security Token
Offering
Security Token
Offering
Step 2 – Preparing the Offering
Prepare offering memorandum
Regulatory filings (Reg A/Reg CF)
Obtain bank accounts
Target offering jurisdictions
Prepare smart contracts
(based on legal requirements)
Website and capability
Build tokenomy
Ensure worldwide compliance

5. Traditional
Offering
Security Token
Offering
Step 3 – Marketing and Selling the Offering
Management roadshow
(specific limited geography)
Investment Banker
Bookbuilding
Limited investors
Conference calls
Valuation
Sale open for a short period
Webinars
Social Media
(Telegram, Reddit)
AMAs
Conference calls
Videos
Worldwide investor base
Sale open for longer period

6. Obtain KYC/AML/Accreditation
Funding in cash before closing
Underwriting or Placement
Agreement with banks
Closing conditions met
Shares delivered to investors by mail or
included in the issuer’s share register
Traditional Offering
Funds released to issuer
Obtain KYC/AML/Accreditation
Funding through the offering website
(including through custody/escrow agent)
based on the smart contract
Direct to issuer
Funding in fiat or cryptocurrency
Tokens issued to investors’ wallets
by smart contract
Security Token Offering
Funds released to issuer by
smart contract
Step 4 – Closing the Offering

7. Step 5 – Post-Offering - Transfers
Traditional Offering Security Token Offering
• Regulation D – Rule 506
• Generally cannot transfer until
one year after issuance
• Issuer approval required
• Transfer documentation
prepared by a lawyer
• Right or first refusal and other
transfer limitations.
• Long time for transfer
• 2,000 holder limit
• Regulation D – Rule 506
• Generally cannot transfer until
one year after issuance
• Direct rading/Immediate
transfer
• Exchange/ATS Listing
• Market-Makers
• 2,000 holder limit

8. Step 5 – Post-Offering - Transfers
Traditional Offering Security Token Offering
• Registered Offering/Reg A/Reg CF
• Lockup of 180 days-1 year
• Ongoing reporting
requirements
• Held by DTCC, not directly
• Transferred via Transfer Agent
• Settlement t+2
• Registered Offering/Reg A/Reg
CF
• Lockup of 180 days-1 year
• Ongoing reporting
requirements
• Immediate settlement
• Visibility to trading

9. Thank you!