Cryptocurrency startup Swarm has an ambitious plan to democratize venture capital, and it has today taken a major step toward that goal by listing tokens that allow investors to purchase fractional shares in privately-owned fintech darling Robinhood.
No, Robinhood, a wildly-popular commission-free stock trading app that recently earned a $5.6 billion valuation, isn’t holding a security token offering (STO), nor has it even announced plans to make its shares available to the general public through a traditional public listing.
Those hurdles, however, did not prevent Swarm from finding a way to bring Robinhood shares to the public anyway.
Here’s how it works. Through partnerships with brokers and syndicate managers, Swarm has sourced equity from former Robinhood employees looking to cash out before the firm’s eventual IPO. That equity is held by what is essentially a shell company, whose shares are then listed on the Swarm platform as SRC-20 tokens.
All of this, Swarm says, can be accomplished without Robinhood’s permission — much less its willing participation. In fact, when the crypto startup first announced in June that it planned to turn Robinhood shares into cryptocurrency tokens, a Robinhood spokesperson told CCN that the firm was not even aware of Swarm. When reached for comment today, the firm provided the same statement and said that it had no further comment.
In any case, these tokens are now live on the Swarm platform, with a hard cap of $1 million in contributions.
“Secondary equities transactions and refinancing of legal entities which hold private company equity are not new in the United States. What’s new here is the tokenization of these assets, and the doors opened by this innovation,” said Philipp Pieper, CEO of Swarm Fund, in a statement.
“One of the key innovations of tokenization is that token owners can participate in the value creation of the very network they are part of. Swarm is bringing this paradigm shift to companies that are key players within this movement, but have yet to permit the network to participate.”
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