HD Group, a Kiwi tech company that started a decade ago, recently announced ‘crypto-equity’ tokens, a new twist in the ICO market. They’re offering 10% of their company shares in tokens that equate to real stock equity. When HD Group profits are declared each year, dividends will be used to buy back and burn tokens.
There have been many questions asked about HDCoin, the most asked question was “Is HDCoin a security token?”
We spoke to Ben Simpson, CEO of HD Group, here are the details:
Q: Is HDCoin a security token?
In a sense yes, because any security token is simply a cryptocurrency token that represents an asset, but it’s not a ST-20 token, rather a crypto token tradable and exchangeable as crypto-equity.
The token itself represents a beneficial interest in the HDCoin Trust which owns 100% of HD Coin Ltd, the company that has purchased a 10% shareholding in the HD Group that is issuing and distributing HDCoin tokens.
There are one billion HDCoin tokens issued as part of this ICO that represents a 10% shareholding in the HD Group.
Q: Is this token legal in New Zealand?
There are no regulations saying that such a token is illegal. Besides, we had consultation with our government market authorities. They made a few suggestions that we implemented, but otherwise were comfortable with our offer.
Q: How transparent is this ICO?
We have tried to disclose everything that a prudent investor would need to know before investing (like an information memorandum) we believe our level of ICO disclosure sets an industry standard to be followed.
Also, take a look at our Video Presentation: https://youtu.be/mQXVKdB1uSY
We will publish regular company updates, financials and news about our business activities, successes and failures. Like a traditional listed company, we hope this communication will keep upward stable pressure on HDC’s value as we pay dividends by burning the tokens. Now remember, our company & team hold NO tokens in reserve so there will not be any large dumping of tokens on the open market after our ICO.
Q: Can retail investors participate?
Yes, HDCoin tokens are open to everyone except citizens or residents of New Zealand, Australia and Fiji.
Q: Will investors be shareholders? How will they receive dividends?
Yes, HDCoin holders will own 100% of HD Coin Ltd via the HDCoin Trust. As mentioned, HD Coin Ltd owns 10% stake in each of the legal trading entities of the HD Group. The shareholding has been updated to reflect our ICO offer i.e. HD Net Limited, Unlimited Internet Limited, ICOEx Limited.
Dividends will be used to buy back and burn HDCoin at market rates.
Q: Do you expect to declare a profit and burn tokens during the first 12 months after the ICO?
Yes, HD Group has been doing well and I believe we will declare a profit and do the first burn of tokens within 12 months of completing our ICO.
Our financial year ends 31 March. Subsequently, 10% of the annual profits tax franked will be paid to HD Coin Ltd. HD Coin Ltd will identify the most liquid market and use a conservative buying strategy in order to maximise the number of HDCoin tokens we buyback. We expect this to become an annual event.
Q: How soon will investors receive their tokens?
Within 30 days of the confirmation of payment and the completion of the KYC process. This is again a first for an ICO.
Q: Your business has been around for more than a decade. Why an ICO?
We believe crypto-equity is the future of ICOs and business funding. The ICO ‘gold rush’ has led many into cryptocurrencies and created ecosystems of uncertain value. Investors may have rushed in but they will soon question the value of the tokens they hold.
On the other hand, crypto-equity tokens are backed by already performing businesses that have real assets and an equity value on the balance sheet with its potential performance, PE ratios similar to traditional companies that list on the Nasdaq for example.
Q: How did you raise funds to get this far?
Our two founders funded the entire business and we’ve been using our company profits since startup to grow the business over the past decade.
Q: Crypto-equity is a new concept. Why did you adopt this model?
Crypto-equity has the potential to become a second market, similar to a traditional stock market. There are currently no regulated ICO exchanges listing these specialised crypto tokens that are backed by company shares and earnings per share (EPS).
It’s also an opportunity for investors to move their crypto into a new type of crypto token with stable upward potential.
A large chunk of ICO investors are putting their crypto into pre-projects.
In fact, 46% of last year’s (2017) ICOs have failed already. Also, most startups take 7 to 10 years to get off the ground or turn a profit. Till then, the investor’s money is locked in an uncertain venture, product or service (literately with no paid full time employees or offices) that may not take off with no liquid market to sell out to.
HDCoin is a good crypto investment in an established company. All the hard ground work and startup years has been done. Investors will be investing into a growing company with proven markets and year on year revenue growth.
We also have an interesting list of projects with huge potential that complement our existing trading brands. We’re committed to building ICOEx, a blockchain-based digital asset exchange that will also serve as an ICO incubator. It will offer turnkey solutions to startups and mature businesses in Asia Pacific. It will help them enter the fast-growing ICO market and launch their digital tokens for capital funding.
Q: Does the potential value of HDCoin token come from the buy back? What if the token is not listed on any large exchanges?
HDCoin will first be listed on our ICO exchange (ICOEx). So there will always be an avenue to trade between HDC <> ETH or HDC <> BTC.
The tokens can also be traded person to person or via other exchanges after our token distribution. The market will set it’s price after the ICO.
Remember: we have no tokens in reserve. The market will own 100% of all tokens so there’s no way we can dump the token price.
Q: What went into making this ICO?
An amazing team, planning and budgets are important for all projects. We have a strong inhouse team and together we planned the ICO, ERC-20 token, marketing and total security. We knew it would be challenging but an interesting project to work on. It took over eight months and a full time team plus contractors and advisors to complete.
The most stressful part for us was identifying the legal aspects and the valuation of the company.