How to Raise Capital using Crypto
By: Hazel Project
Tags: Capital, Stock Market, Tokenization, Cryptocurrency, Crypto

Raise of capital in traditional practices

The different methods by which publicly-traded companies raise money to fund expansion include the use of bank debt or the sale of new shares. The three main ways in which companies can raise capital on the financial markets are share placings, open offers or rights issues.

What are the advantages of traditional raise of capital?

The listing on a major exchange (i.e. NYSE, Nasdaq) has considerable benefits, most important being intrinsic marketing potential and trustworthiness:

A value for securities can be established;

Increased access to capital-raising opportunities (both public and private financings) and expansion of investor base;

Liquidity for investors is enhanced since securities can be traded through a public market;

Publicly traded securities are attractive for certain other purposes (as transaction currency or executive and employee compensation, for example);

Credibility and visibility with the public is enhanced, as is the corporate image;

Lower cost of capital relative to debt financing.

Now, all of this sound great. The problem is, most of us can’t list a company on a major traditional stock exchange. The quote ”You have to spend money to make money” comes to mind. It’s an old saying — historians say the phrase could date back as far as 1500 BC when ancient Egyptians used hieroglyphics on their tombs which translated into “I have not been made without work” — but nonetheless true.

Although there are many benefits, the costs of going public are considerable. The requirements are even greater. Let’s take Nasdaq for example:

Nasdaq listing costs

$25,000 application fee;

between $150,000 and $295,000 in entry fees;

Upfront costs of an IPO can be significant. Underwriters’ commissions are typically 4%–7% of the proceeds of an IPO; their expenses are additional. A company will also incur other offering expenses, including legal, accounting, printing and filing fees, and will be subject to ongoing costs associated with public company compliance obligations.

Minimum requirements

>$4.00*1,250,000 (shares) + owner’s equity market cap;

minimum of 450 round lot shareholders (100 shares or more) or 2,200 total shareholders or 550 total shareholders with 1.1 million average trading volume over the past 12 months;

minimum of 3 market makers;

$25,000 application fee;

meet all the criteria of at least one standard as defined by Nasdaq:

Standard №1: Earnings

The company must have aggregate pre-tax earnings in the prior three years of at least $11 million, in the previous two years at least $2.2 million, and no single year in the prior three years can have a net loss.

Standard №2: Capitalization With Cash Flow

The company must have a minimum aggregate cash flow of at least $27.5 million for the past three fiscal years, with no negative cash flow in any of those three years. Also, its average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previous fiscal year must be $110 million, minimum.

Standard №3: Capitalization With Revenue

Companies can be removed from the cash flow requirement of the second standard if its average market capitalization over the past 12 months is at least $850 million and revenues over the prior fiscal year are at least $90 million.

Standard №4: Assets With Equity

Companies can eliminate the cash flow and revenue requirements, and decrease their marketing capitalization requirements to $160 million if their total assets total at least $80 million and their stockholders’ equity is at least $55 million.