Is traditional IPO 'dead'? Is on-chain STO the future?

Compilation and organization: BitpushNews

The era of technology mergers and acquisitions may be coming to an end, but the era of encryption may just be beginning.

The comprehensive effect of the new policy makes it more difficult for startups to exit through IPOs or acquisitions, but it becomes easier to issue securities tokens (STOs) supported by equity on the Internet. Why? This article will explain one by one:

IPO becomes difficult

For decades, the Sarbanes-Oxley Act (Sarbox) rules of the U.S. Securities and Exchange Commission (SEC) have made it extremely cumbersome for small companies to go public. The rules were originally intended to prevent the next Enron incident, but they have not been effective (nor have they prevented the financial crisis). However, they have halved the number of U.S. listed companies from the peak in 1999:

![Traditional IPO is “dead”? Is on-chain STO the future?])https://img.gateio.im/social/moments-cb4817cede6491dbfea31a4409bfe985(

) 2### Mergers and acquisitions have also become difficult

As a result, from the mid-2000s, the conventional view was that tech companies should remain private for longer. IPO difficulties and acquisitions became the main exit route for venture-backed tech startups. This approximately 20-year period saw massive exits such as Instagram ($1 billion), Oculus ($2 billion), and WhatsApp ($19 billion).

However, since Lina Khan took the lead at the Federal Trade Commission (FTC), large mergers and acquisitions have been blocked under the pretext of ‘increasing competition,’ with the reason being to prevent big fish from eating small fish. This is the (apparent) reason behind the regulatory authorities in the EU, the US, and the UK’s crackdown on Adobe’s acquisition of Figma, which should have been a huge exit to provide funding for more startups:

! [Traditional IPOs are “dead”?] Is on-chain STO the future? ])https://img.gateio.im/social/moments-1492d0d117c4e08a332c9c0a619e85df(

Khan’s logic is fundamentally wrong, because when big companies acquire small competitors at a high price, it is actually a surrender - and a huge capital injection into the venture capital ecosystem to create more such competitors. If such exits (whether IPO or M&A) decrease, then tech startups will not be able to obtain capital, and there will be no competition.

) The new Trump administration still opposes mergers and acquisitions!

Tech industry insiders once believed that the new government would be more friendly to mergers and acquisitions. But surprisingly, the new government has embraced Lina Khan’s logic — and apparently is continuing her policies:

![Traditional IPO is “dead”? Is on-chain STO the future?]###https://img.gateio.im/social/moments-d7673a2da0d4b70141c21e60344c069f)

I think that’s partly due to their (understandable) tribal hostility to Big Tech’s media-driven censorship during the 2020 election. But unless things change, that means tech M&A won’t return.

In addition, the new government has continued Biden’s anti-merger policy in another aspect. Japan’s Nippon Steel was blocked by Biden from acquiring US Steel, and the new government has maintained this block. However, they seem to offer a different path, with Nippon Steel investing in American companies without owning them.

In any case: it is not easy for either large companies or foreign companies to acquire American companies. And mergers and acquisitions are already very difficult. It’s like getting married now, it’s a big project. If you add some unpredictable government risks to a deal that is already difficult to complete, many mergers and acquisitions will not even be considered.

( 4) But the encryption window is already open

However, when the government closes one door, sometimes it opens a window. Despite the fact that IPOs are still expensive, and mergers and acquisitions have become more difficult… the new government has actually relaxed its regulation of cryptocurrencies by introducing President Meme coins and crypto-friendly executive orders.

While no one knows what the new rules are yet, if you can issue unbacked meme coins, then you can almost certainly also issue equity-backed ICOs, also known as security token offerings (STOs):

![传统IPO已“死”？链上STO才是未来？]###https://img.gateio.im/social/moments-92d2804fcf07a04869eea16834e08afe)

In fact, STO actually aligns with the government’s vision that ‘the world should invest in tokens created in the United States’ and that ‘small entities should be able to remain independent for a longer period of time.’

Do you remember their idea that investing in Japanese steelmaking in the United States is possible, but owning it is not? This may be one way to solve the problem. If you don’t allow large tech companies to acquire small tech companies, you need to allow the latter to raise funds in some way to compete with large tech companies.

Therefore, allowing the world to invest in them on the chain without owning them, just like Japanese iron and steel investment in American steel companies. Just like Masa and Saudi Arabia are investing hundreds of billions of dollars in American companies without fully owning them.

It’s a financial win-win while preserving sovereignty.

In addition, in theory, small businesses (such as restaurants, etc.) can also conduct STOs. In theory, STOs will lower the cost of listing capital from millions to zero. But you need to overlay new decentralized regulatory mechanisms in such a market, similar to the star ratings of Uber/Airbnb/Amazon and the bans on bad actors.

( 5) From Blue State to Blockchain

Anyway: There are countless details to be resolved in the process of putting equity table on chain and conducting high-trust public issuance (with lock-up period, etc.).

But this is ultimately where we want to go. California is no longer the only place to operate, Delaware is no longer the best place to register, and New York is no longer a trustworthy rule of law.

The era of Blue State has come to an end, but blockchain is on the rise.

Because obviously, Internet companies should exist on the chain in a native Internet form and be able to access the capital market of Internet scale through encryption. In fact, although the number of stocks listed on the New York Stock Exchange has been declining, the number of digital assets listed on the Internet has been increasing.

So, I want to say to my tech friends: Yes, the window for tech IPOs and acquisitions may have closed, but the window for tech STOs may well open wide.