Initial Public Offering vs Initial Coin Offering
There are several differences between an Initial Coin Offering (ICO) and an Initial Public Offering (IPO). First, IPO is mostly done by companies that are already doing business. Some of the biggest IPOs in history are those of companies like Saudi Aramco, Alibaba, Facebook, and Royal Bank of Scotland. A company that is raising money using an ICO does not need to be in operation. In fact, most ICOs are usually based on ideas.
Second, the IPO process is a long one and tends to include many banks, who act as underwriters. There are other consultants like lawyers that are needed to carry out the IPO. ICOs are different. All one needs is an idea, a white paper, and a marketing budget. One can start and complete the ICO process within a few days. Still, it is recommended that you use ICO consulting Services to have a successful fundraising.
Third, IPOs are mostly national in nature. For example, it is very difficult for a retail investor in India to participate in an American IPO. On the other hand, ICOs are global events. Anyone can easily buy a stake in an ICO.
Fourth, IPOs are highly-regulated industries. In the United States, the securities and exchange commission (SEC) is tasked with overseeing the IPO process. The ICO industry is not regulated. This is the main reason why there are a lot of ICO scams.
In addition, in an IPO, the holders benefit when the share price moves up. As the company grows, the investors start making money using dividends. There are no dividends in an ICO.
Another difference between an IPO and an ICO is that companies are mandated by law to disclose many things to shareholders. For example, when the CEO buys or sells shares, they are required by law to disclose these issues. This is different for ICOs. The company founders are not obligated to release any information to investors.
Finally, in an IPO, companies are required to announce their revenue numbers every quarter. This does not apply in an ICO.