Security tokens have been proposed for some time now as an alternative to raising money in capital markets via shares or bonds. Timeless Luxury Group, which last month began its own security token offering , is proof that established businesses are looking to the crypto markets as an alternative option for fundraising.
Timeless Luxury Group , which operates a luxury holidays, villas and yachts business, had previously issued corporate bonds on the Düsseldorf Stock Exchange. It ran its first bond issuance in 2013 when it raised €10 million, and again in 2017 when it raised a further €10 million. However, it found limitations with this traditional fundraising route.
Michael Gössl, CEO of Timeless, explains:
Raising money using capital markets offers no flexibility, and the rules are very rigid. For bonds, there is the loaned amount, the coupon and the maturity date. Sure, there are slightly different ways to structure bonds, but it’s all a variation on a theme.
Security Token Offerings provide an alternative option for companies like Timeless. STOs are an evolution of Initial Coin Offerings, but unlike ICOs they are backed by an asset, the details of which are written into the smart contract of the token. This gives STOs a foundation of value, unlike most ICOs which are purely speculative. In the case of Timeless, it allows the company to give its token holders a share of profits:
Michael Gössl says:
An asset-backed digital security token offers something totally different [to corporate bonds]. The terms are flexible and written into a smart contract, and it’s instantly liquid on crypto exchanges or peer-to-peer. It offers a new way of investing, and we’re at the tip of the iceberg in terms of where it will go. Timeless is pioneering this method of fundraising that will become the new normal.
Timeless is looking to use the money raised by issuing security tokens to expand its business, and give STO investors the opportunity to participate in the planned development of the company, as well as discounts on holidays.
As STOs become more popular and the process of running an STO becomes more established, making the switch from corporate bonds to security token offerings will surely become a well-trodden path for other established businesses looking to raise funds.