The cryptocurrency market continues to attract the attention of many traders and investors in equal proportions. Though its critics consider it no more as a ”bubble” that can pop at any point in time, its proponents have come out in its support openly and term it as a revolutionary innovation. Initial coin offering or ICO is different from initial public offering (IPO) in the sense that both processes use different means with a common goal- to collect funds for the project. However, there are other differences too that are mentioned below. Read on to know more about it.
Unlike IPOs, ICOs are not bound legally to issue any form of legal documentation. ICOs are unregulated, which means that just about anyone can start it by outlining key information pertaining to the project in the whitepaper. On the other hand, any company looking to issue IPO must create prospectus which must include key information about the company and its intention to issue its shares in the public domain.
Track Record & Credibility
IPO is a long process which requires the verification of accounts by professional accounting firms, liaising with exchanges, and investment banks to act as underwriters to meet certain requirements. It is essential to have a good track record before a company can list its shares through IPO. On the other hand, ICOs do not require any track record or adherence to the regulatory framework. This makes it very difficult to assess their fundamentals.
The stocks acquired through IPO represents an ownership stake in the project. The utility of holding stock entitles shareholders to receive dividends and a right to vote in the shareholders meeting. On the other hand, investment in ICO coins does not grant an ownership right to the unitholders. However, there are other ways through which investors can reap benefits in the future.
Duration of Offerings
Traditional IPO issuance can take anywhere from 4 to 6 months as it is required to go many legal stages to get a final approval of the relevant authorities. The entire process of ICO is of much shorter duration as it depends on the nature and timeline of the project. Once a whitepaper is drawn out, just about anyone can begin the crowdsale.
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