Instead of holding tokens in the company’s controversial blockchain, Telegram investors were given the opportunity to exchange tokens for capital in the company. The SEC stopped issuing Telegram tokens, forcing the company to postpone launch. But with the compelling agreement she had offered existing investors, she had now bought time to fix the problem.
Telegram investors are considering shares or cash
Following the failure to meet the announced start date of April 30, 2020, Telegram’s dealings with its investors changed unusually. If investors took their invested capital in the Telegram Open Network (TON) as a loan to the company, they would get their entire investment back, plus 10%. The loan is said to be repaid in April 2021. The repaid investments would be in shares.
Gabriel Shapiro, an attorney focused on the crypto space, told:
“I believe this may be a great outcome for the Telegram SAFT investors. They thought they were buying a token that would be directly integrated into the Telegram app and whose value would likely rise with Telegram’s network effects.”
Although Telegram launched a successful $1.7 billion token sale in 2018, it has never been possible to own traditional equity in the communications giant.
The tabled option may prevent investors from liquidating their stakes immediately, buying the firm time to find a long-term solution without returning the money it raised. Shapiro added:
“Now, if [investors] take the new deal on the table, they can be among the first venture investors in Telegram’s equity, which is likely a far better investment than tokens.”
If TON investors decide to liquidate their token investment in Telegram, they can walk away with 72% of their investment. The company and investors mutually agreed on this figure when the issuance of tokens was first postponed in January 2020.
Investors are now left to choose one of two options: sell their stake for 72% immediately or lend it out for a year and receive 110% of their capital in the form of Telegram shares.
For that 110% return, though, investors are also betting that the company will raise a fresh round of investments next year. Only then would they have the opportunity to sell their equity holdings. Those bullish on the company’s prospects will take the deal, while the rest of the investors will walk away with 72% of their capital in cash.
A month prior, a New York district court slammed the communications giant with an order to halt the disbursement of tokens. Telegram’s token raise was deemed an unregistered security offering by the SEC, and many of those who invested in the project live in the United States.
If the company is unable to reach an understanding with U.S. authorities one year from now, investors will, at the very least, own equity of the fifth largest messaging app.
You should be interested in: McDonald’s, Starbucks and Subway are among companies testing Chinese digital currency
