The MERJ Exchange, the national securities exchange of Seychelles, has extended its $4 million initial public offer (IPO) to 28 February in the form of tokenized shares. The exchange already listed the tokens on itself by introduction on 7 August 2019 and opened the IPO on 10 September.
The exchange, previously known as Trop-X, says it is the world’s first fully regulated exchange that can handle both securities and digital assets, has a fully regulated post-trade processing infrastructure and works with a central clearing model. It operates a stock exchange for equities, debt and derivatives and says it will be first global market to offer the full cycle in primary and secondary markets in digital assets.
At the time of issuing the prospectus (27 August 2019) the bourse had 31 listed equities and 2 debt issues with market capitalization of $382.7 million. There were 3 members and 5 listing sponsors.
The MERJ Exchange shares are tokenized into digital assets. The offer is for tokens representing 1,652,893 securities at $2.42 per share, to be traded in USD. This will be 16% of the total shares if issued in full giving a valuation of $25m for the exchange. The minimum raise for the IPO to go ahead will be $500,000, the minimum subscription per investor is $2,000 (826 shares) and $10,000 (4,132 shares) from within the USA.
MERJ Exchanges plans to spend the offer proceeds on IT advisors and consultants, increasing its staff and marketing.
The total share capital is 15 million ordinary shares with a par value of $0.03 each. This has been tokenized to 8,684,207 tokenized shares which are currently listed.
It is starting to attract international partners including Jumpstart Securities in the US and Globacap in UK for the offer. The sponsor advisor for the offer is PKF Capital Markets (Seychelles) Ltd.
According to the investment deck (available here), it has big plans to increase the number of issuers from the current 33 to 111 by the end of year 2, boost the total market capitalization (already $1 billion according to a January 2020 newsletter) and increase the number of sponsors and brokers, as well as liquidity. It will cut trading fees from current 0.5% to 0.15% and have a capital raise fee of 0.3%.
MERJ aims to position itself as a key regulated system as blockchain technology transforms the way the world delivers value, including tokenization of illiquid assets including real estate, shares in small and medium enterprises (SMEs), copyrights and collectables such as art. It hopes to take on global incumbent exchanges which have legacy structures and stakeholders that are not yet ready to tackle the change.
The exchange was incorporated in 2011 as Trop-X (Seychelles) Ltd, received its licence to operate the Seychelles Securities Exchange in June 2012 and went live in August 2013 with the first equity listing. It became the national numbering agency and launching debt and derivatives exchanges in 2014. It listed its first Eurobond in 2016 and started working on the digital asset project with the Ethereum Alliance. It changed name in December 2018 and did its first tokenized listing, of its own shares, on 7 August 2019. Operational partners include Euroclear and Strate in its partners.
Ed Tuohy, CEO of MERJ Exchange, says in the investment deck: “MERJ has spent years establishing the infrastructure, the regulatory licences and the technology. We can now move decisively.”
According to the deck: “MERJ enjoys a number of key structural and organisational advantages which put us firmly ahead of the competition. These are: vertical integration, regulatory approval, agile organization, respected jurisdiction, live and operational, direct access platform.” The structure is MERJ Exchange Ltd and 2 wholly owned subsidiaries, MERJ Clearing and Settlement Ltd and MERJ Depositary and Registry Ltd.
The regulator Financial Services Authority Seychelles is an associate member of the International Organisation of Securities Commissions (IOSCO) and meets similar regulatory standards as all global regulators. MERJ is an affiliate member of the World Federation of Exchanges (WFE).
Seychelles is not listed on tax avoidance blacklists but is on the grey list of the European Union (with 31 countries including Namibia and Botswana) and Oxfam. By comparison Mauritius was removed from all EU lists in October 2019 but remains on the Oxfam grey list.
The Seychelles regulatory structure allows MERJ to integrate overseas organizations that are licensed and regulated in a recognized jurisdiction and there is no requirement that members have a presence in Seychelles.
It aims to provide seamless direct access for individual users using mobile and web apps.
For more information and to apply for the offer look at the MERJ Exchange website or the offer page on Globacap and US investors should speak to their broker.
NOTE: This article does not constitute investment advice, the purpose is news information. The writer is not affiliated to MERJ Exchange. Read the full prospectus, available here.
