Portal, HighCircleX join forces to let everyone invest in pre-IPO companies before they go public
For far too long, investing in pre-IPO companies was restricted to private equity companies, banks, venture capital firms, and individual investors with a net worth of more than $1 million or annual income above $200,000.
As such, only institutions, insiders, and the country’s wealthiest investors had access to the best private market deals while everyday investors are left out. Now that’s about to change as two high-profile tech companies joined forces to level the playing field for ordinary investors so they can buy shares in pre-IPO companies before they ever hit the open markets.
This week, the decentralized finance (DeFi) protocol Portal joined forces with the asset marketplace HighCircleX (HCX) to tokenize stocks of pre-initial public offering (IPO) companies. This collaboration aims to democratize access and make investing in private equity easier for average investors to invest in promising tech companies.
Through this partnership, HighCircleX is looking to address some of the problems with traditional assets such as the lack of liquidity and value uncertainty. HCX makes it easy for investors to invest in private equity offerings.
The idea of digital asset tokenization is a game-changer considering that, traditionally, ownership of assets is represented by owning shares of that asset. However, when an asset is tokenized, ownership of those shares is based on ownership of a digital token representing one share in the asset. The tokenized asset can be easily traded to enable quick liquidity, fractional trading, and instant settlement.
In a statement, HighCircleX explained that all tokenized pre-IPO stocks will trade on HCX and participating members will also have instant access to view all the platform’s offerings and they can obtain fractional ownership with the assistance of our experienced team and technology-driven platform.
HCX asset platform is operated by High Circle Ventures, a firm that provides liquidity opportunities for VC Firms, angel investors, employees, founders, and other shareholders. According to the announcement, HCX will create and manage a limited liability company (LLC) for the investments. The proceeds from the LLC will be used to purchase a pre-IPO investment.
While the investors will not own the shares of the underlying LLC, they will own tokens that “represent ownership” of the LLC. Such tokens can then be used for trading, access liquidity, fractional trading, and instant settlement on the HCX marketplace. Additionally, token holders can cash out even before an investee company goes public or gets acquired.
HCX is currently tokenizing Pre-IPO shares and real estate but they plan to expand to other assets in the very near future. For now, the pre-IPO companies that can be tokenized and traded include SpaceX, Epic Games, Klarna, Automation Anywhere, and Cross River Bank.
Commenting on the partnership, HighCircleX CEO Hermanth Golla said that tokenization helps to overcome challenges private equity markets face. Hermanth added:
“HCX makes it a breeze for investors to invest in private equity offerings. It gives members instant access to fractional ownership of stocks in the hottest companies. We believe that tokenization and fast, easy tradability that come with it will unlock and expand this market tremendously.”
Portal’s executive chairman Chandra Duggirala also explained that the partnership aims to bring more utility to digital assets.