$130 Million Bitcoin IPO Just The Beginning

David Weild has a long history in the securities business, first at Prudential Securities and later at Nasdaq where he served as its vice chairman until 2003. In 2010, while at Grant Thornton, he authored an influential paper that ultimately provided the foundation for the Jumpstart our Business (JOBS) Act, signed into law in 2012 by President Barack Obama. The new act was designed to make it easier for more companies to go public, and for more people to invest.

What happened instead is almost nothing. Only a smattering of companies have used the full suite of tools the JOBS Act offered, resulting in Weild calling for a Jobs Act 2.0 that would be built using blockchain, a shared distributed ledger. He reckons that the new technology would be perfect for facilitating the legal issuance of shares with few middlemen and a wide distribution that would include small investors. In 2017 Weild announced that he had ten companies in the pipeline for JOBS Act compliant initial coin offerings (ICOs) but the ICO crash put everything on hold.

Last month the first of Weild’s companies was revealed, when Gibraltar-based INX filed initial public offering paperwork with the SEC to raise $130 million by selling security tokens similar to bitcoin in bite-sized investments as small as $1,000. In this interview with Forbes, Weild, who sits on the board of INX, says he now has 14 blockchain and cryptocurrency clients waiting in the rafters to bring the best of blockchain to the best of traditional exchanges, and perhaps, finally get the JOBS Act right.

Excerpted from Forbes CryptoAsset & Blockchain Advisor.

Forbes: Tell us a little about your company.

David Weild IV: Weild and Co. is taking a completely different tact of building an investment bank. We’re in 17 states and the District of Columbia now. It is a low fixed cost model. We’re aggregating producers. We think it’s the future of investment banking, in the middle market in particular. We’re looking to build the first scale-integrated—collaboration focus for the benefit of clients—investment bank in the country.

We have a very active practice. We do everything from tech, blockchain and crypto, to investment banking advisory, insurance, energy, healthcare and life sciences. We do institutional fund placements in venture capital funds, private equity funds and hedge funds.

We do a lot of middle market deals that range in size, typically from $5 million up to half a billion dollars or larger. We also do quite a bit of corporate, debt placement. Those transactions typically run about $10 million to $150 million. We’re working on for instance, center financings and those can be rather large.

We think our business is one of the greatest social impact stories ever told because we’re moving into that collapse of the middle market that occurred where literally more than 80% of the companies that were banking the middle market over the last 20 years are gone.

Forbes: What created this collapse?

Weild: It’s largely because of the change in the economic model that was essentially caused by regulatory changes, so collapse in trading spreads, which were dictated by the SEC, and then Congress, and then the advent of the internet, which effectively enabled a self-direct model.

Retail brokers in the U.S. went from being retail stockbrokers and marketing new issues and securities and smaller-capitalization stocks to basically marketing funds and fund placement, right? Aggregating assets, becoming financial advisors.

We have hundreds of thousands of brokers in the United States that are no longer brokers in the traditional sense. We lost that major distribution asset in the U.S. economy. And we also ended up losing the aftermarket economic incentives that were critical to supporting smaller-capitalization public companies.

We went from quarter-point trading spreads in the 1990s, which were telephone-quoted markets, to penny tick size electronically traded markets, which essentially gutted the economics that Wall Street depended on to provide equity research in smaller-capitalization companies.

Forbes: Is there any connection between your early work of researching and identifying the exact severity of the middle market collapse and your interest in blockchain and cryptocurrency?

Weild: Having run technology investment banking all the way back to Prudential Securities (I was the senior management representative that oversaw a lot of the technology project design) I think technology shifts are important to markets in general.

Crypto and tokens—particularly the tokenization of securities—is, for me, kind of a continuation of the move that went from the old days of physical stock and bond certificates to electronic delivery and global settlement to now tokens. I think we’re in the early days of seeing a movement away from a central party or the requirement that there’s a central party—it may be mandated by the lawyers, but decentralized.

Blockchain technologies allow you to do peer-to-peer trading without an intermediary. And this is an evolution in markets. So obviously I think it’s important to pay attention to it.

It was a lot slower getting adopted initially than I think people thought it was going to be, largely because of the regulators, rightly, being concerned. The same thing with crypto. If you look at what Facebook was trying to do with Libra, there were some significant concerns.

A law grad asked me what I thought very early on of the House Financial Services Committee and Maxine Waters stepping in and asking questions. I said I thought she was very right to be focused on it because you’ve got a whole series of issues with certain cryptocurrencies.

Forbes: Why do you think regulators should be concerned with Libra?

Weild: With Facebook having 2.3 billion monthly users, it could obviously—if left unsupervised and unchecked—create a very large stablecoin and a whole series of risk, not the least of which is if you’re using a basket of fiat currencies, does it become so large that it displaces the dollar as a reference consequence, and as a consequence then a storer of value, and as a consequence causes the decline of the U.S. dollar, which disrupts the U.S. economy. That’s one risk.

The other risk is, just like with the currency tether, who’s auditing how much fiat currency it is acquiring to back its stablecoin? Because ultimately if it doesn’t acquire the fiat currency to back it in the open market, you can have a situation where somebody’s essentially printing money, right?

Forbes: What’s your main focus on for blockchain and cryptocurrency companies?

Weild: We’ve been working on capital raises, primarily. And I personally have been active as an advisor or a board member for the series of companies. The portfolio is not much more than 15.

But we’ve also talked to a lot of bankers about joining us. And in this particular area because we’re very much by-the-book kind of people. Three months before SEC Chairman Jay Clayton came out and said that he hadn’t seen an ICO that he didn’t think was a securities offering, I told everybody that we were going to treat them all as securities offerings during a Monday morning investment banking call that we host every week. It was very clear to us that they were securities. And not withstanding what I think a lot of the youthful libertarians wanted them to be called, they were just a different form of security.

I think that the government is doing its job. Unfortunately, because it’s a very complicated area and it has very complex questions—most regulators don’t show up with a background in crypto or blockchain per se—it tends to be a very slow and deliberate process of reviewing all the issues. Very iterative.

Forbes: It sounds like you’re doing your best to align yourself with what Clayton was saying he was seeing in the ICO world.

Weild: I think it’s the right approach. You have to respect regulation, and you can’t engage in wishful thinking. There’s been an inordinate number of people that have engaged in an awful lot of wishful thinking and the fear mongering of pointing to other jurisdictions that have much less at stake.

The United States is the largest capital market in the world. It is the most liquid. As a consequence, we have a lot to lose by getting it wrong, whereas some of these jurisdictions that are not very significant in the capital markets in their own right like Gibraltar, Malta in particular, and even Switzerland for that matter, can afford to be much more aggressive around regulation and embracing people because they know a lot of the money is going to come from outside of their countries.

Being a first mover when you’re a small country may bring you market share and wealth, which is significant relative to the size of your economic base. But when you have the largest, most liquid capital markets in the world, being methodical and disciplined in your approach helps you. .

Forbes: Can you tell us a little more about the companies you are working with?

Weild: Let’s first broadly look at the portfolio. I would say that about half of them are sort of private placement clients for the most part. So, they’re not public registration clients. The other half are mostly advisory and board memberships.

For instance, there are three companies I’m involved with that are going through the front door of regulation as exchanges in some manner, shape or form. They all have very different strategies. For example, Templum was approved to have the first alternative trading system (ATS) to trade tokens as securities in private markets (pre-public registration). A company called 55.com, for which I’m cochairman of the board of directors, is really an aggregation of exchanges to create an asset marketplace, if you will that depends on the trading of tokens. And the strategy is essentially one of growth via acquisition and then integrating exchanges in multiple jurisdictions that are properly registered in each of their jurisdictions to create a global best fit, as distinct from just a national best fit. And then there’s my involvement on the board of directors of INX.

Forbes: Thank you.

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