Factom blockchain firm going into liquidation

Posted: 8 April 2020 6:25 pm

Picture not described

This is one of probably very few cases where the ICO was a better bet than the equity.

Factom is, or was, a blockchain firm focused on using the Bitcoin blockchain to create immutable audit trails via the FCT token.

On 2 April, it said that in the absence of further funding, it will have to enter liquidation.

This came as unpleasant news for Factom's chief investor, the FastForward investment company.

"We are extremely disappointed with this news from Factom," said FastForward director Ed McDermott. "In light of this Dissolution Event under the SAFE (simple agreement for future equity), we are taking swift action to protect our position as best we can in the circumstances albeit the ability to generate any meaningful return is uncertain.

"As we go through the Receivership process and understand more of the events that led to this position, our position as investors in Factom is expressly reserved."

The gist is that FastForward, which owns more than 90% of Factom equity, will set about stripping the company for parts such as intellectual property and office chairs to try to recoup as much of its investment as possible, although it doesn't sound hopeful.

The fun part

The Factom network and token will continue operating as usual without the company, which is good news for the businesses that use it.

Japan's Coincheck exchange, for example, just started using the system the day before the liquidation was announced. In a blog post, Coincheck said it doesn't anticipate any problems as a result of these events.

Meanwhile, the total market cap of the Factom token (US$16.45 million at the time of writing) is several times higher than the equity value of the Factom company.

Even now, FCT's current price of $1.70 a pop is many times higher than its ICO price of $0.12 equivalent, even though it's a solid 98% down from its all-time high of $87.

This is one of probably very few examples where the tokens ended up being a much, much better bet than the equity.

Many warnings around ICOs, exchange tokens and similar have been focused on highlighting the lack of protections associated with holding tokens rather than equity, and the fact that a token may be intrinsically worthless.

Here we see the flip side. The value of equity hinges on a company's ability to generate revenue, but it's possible for a company to create a self-sustaining token ecosystem without generating a sustainable business.

The scoreboard is still pretty lopsided, but this is one point for the ICOs.

Also watch

Disclosure: The author holds BNB and BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Latest cryptocurrency news

Picture: Shutterstock

Get into cryptocurrency

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site