Initial Public Offering (IPO) Vs Initial Coin Offering(ICO) | The Ultimate Face-Off

in #ipo6 years ago (edited)

Blockchain technology is all set to radically transform global trade, institutions and firms that govern it. As this technology finds a new way to upheaval the way we design, make, deliver and coordinate the use of goods and services globally, entrepreneurs have started using artificial intelligence to raise funds for their business.

The concept of ICO has become very popular as a means to raise capital and provide liquidity for its operations.

Initial Public Offer (IPO)

Initial Public Offering (IPO), also called “going public”, is a process through which a company goes from private to public by issue of stocks/ shares to the general public.

It is the first time that a company invites the general public to participate in the ownership of the firm. IPOs are generally issued by firms that are new and small hat wish to expand their capital base. It can be understood as a money making move wherein the basic idea is to raise funds and increase liquidity by the sale of shares. The money can be then used for the expansion of business, reinvestment, infrastructure, etc.

For IPO a company issues a prospectus that is filed with the Securities and Exchange Commission. The company with the underwriter decides the price of the stock as the date of IPO approaches.

Initial Coin Offer (ICO)

Blockchain technology and cryptocurrency have gained a lot of attention from investors in the recent past. Initial Coin offering or crowdsale has become an important source of fundraising by the firms especially startups. In order to avoid the expense of initial public offer and the hassle of convincing a venture capitalist to invest in the company, firms have found a way out using blockchain technology.

The ease of transacting and exchanging through crypto-tokens, use of smart contracts has captivated firms to rely on the community to raise capital. ICO has a larger reach and appeal to the audience and is much simpler than IPO.

ICO is a means of crowdfunding through creation and sale of digital coins or tokens. Under ICO, smart contracts assign various functions to the cryptocurrency token holders. These tokens act as shares/stocks entitling token holders with certain rights over the platform’s future. Token holders are free to sell these tokens and close their relationship with the company at any point of the time.

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