There aren’t many stocks that rise 700% in about a month and then fall 75% in about a week, yo-yoing as if it was a crypto coin.
That’s perhaps because there is only one known stock trading company that has launched a token anywhere in the world.
Phunware acquired in February 2018 a so-called blank check company that did not have an established business plan, Stellar Acquisition III, which was trading on Nasdaq.
In June they then announcedd Phunware’s subsidiary, PhunCoin, “has launched an offering for a new token pursuant to Rule 506(c) of Regulation D as promulgated under the Securities Act of 1933.” That being limited to accredited (rich) investors.
They hoped to raise between $10 million to $100 million in an Initial Coin Offering (ICO), but a recent filing shows they raised only $985,000. That’s despite Ari Paul, Chief Investment Officer and Managing Partner of BlockTower Capital, stating:
“We look to invest in projects like PhunCoin that bridge the gap between cryptocurrency and real-world users.”
The company itself says they raised $100 million in traditional financing from institutional and corporate investors like Cisco and many others.
Tokenized Mobile Data
Phunware describes itself as a “Multiscreen-as-a-Service (“MaaS”) platform, a fully integrated enterprise cloud platform for mobile that provides companies the products, solutions, data and services necessary to engage, manage and monetize their mobile application portfolios and audiences at scale.”
They say Phunware’s platform runs on a billion mobile devices, handling six billion daily transactions, but the company has incurred significant losses in each fiscal year since their inception in 2009 according to a recent filing.
Nonetheless, the Securities and Exchanges Commission (SEC) allowed them to start trading on the stock market, with Randall Crowder, COO of Phuncoin, stating:
“As of 4:15 ET on 11/13/18, Phunware, Inc. cleared the SEC and received its effective date to list on NASDAQ despite launching PhunCoin, an innovative new security token that’s going to tokenize one of the most valuable assets on the planet, data.
Nothing like making a little history… becoming the first company to successfully navigate the SEC process to list on a public stock exchange while simultaneously launching a security token offering.”
Their whitepaper describes a general system of allowing users to control their data, with options to sell them on to Google, Facebook or others who have to pay for it in Phuncoin.
This is to be built on Stellar, but it hasn’t attracted much attention in this crypto bear market. While the stock of its parent company gives it a market cap of close to $4 billion, almost 120x its revenue.
They secured a patent last month for monitoring outdoor and indoor regions with mobile devices, stating in a press release:
“Seamlessly detecting and managing location transition to enable personalized experiences based on a user’s surroundings is critical for brands wanting to have proximity-based interactions with their audiences.”
Making this not quite your usual publicly traded company, with Stephen Gandel of Bloomberg not impressed, stating in an editorial: “the promise of Phunware, and the apparent reason for its soaring stock, is its digital currency.”
Crypto Stocks, the New Thing?
Jay Clayton, the current SEC chairman, has come down hard on ICOs, but that’s only if you sell it to the public. If you limit a token sale to only people earning $200,000 or more, then you’re in the clear.
That’s the path Phuncoin took, but the timing in the crypto market did not serve them well. Yet it may have served them quite considerably in the traditional market.
With so few public crypto related offerings, scarcity plays its part. For Phunware there are suggestions of significant concentration in shareholdings too, but there may also be demand by institutional investors who are prohibited by law from holding non-securities save for in small amounts.
Stock tokenization or a Securities Toke Offering (STO) has been suggested as a potential new trend for some time, but it hasn’t really caught on so far because SEC has refused to take into account certain unique features of tokens.
As an example, when the concept of a stock was invented, the only way to verify that a claimed stock is real rather than some fake paper was to keep the name and address of the shareholders.
With a token, the token itself is a stock and you can’t fake it, but this same ancient law applies in this digital age as Congress has not changed it. Thus the token has to keep all the names and addresses of token holders with such names to be updated every time the token changes hands.
A red flag law at its finest, as useful as requiring a man to walk with a red flag in front of a car to warn others of the approaching vehicle. Something they did do back when the car was a very new thing.
This lack of adaptability by the bureaucrats and lawmakers has slowed down a potential modernization of the stock market and the opening of Wall Street to all.
Yet approaches like Phuncoin might be one way around it whereby you still use the stock for fundraising and public trading at the same time as you use a token which could potentially be utilized for some application, like buying and selling data.
The token aspect might then affect the stock, especially if it concerns a tech company. Yet whether Phuncoin or Phunware are worth $4 billion, is not clear at all, token or no token.