It has been widely reported that Telegram has decided against a public initial coin offering (ICO). This comes after Telegram raised over $1.7 billion in a “purchase agreement for cryptocurrency,” according to public documents.
The first $850 million was raised by just 81 investors, as indicated by the Form D filed with the SEC.
A second Form D later revealed that 94 investors kicked in the other half of the investment. Chatter indicated investors were battling to take part in the funding round as demand was intense for the fast growing social network that has become the forum of choice for everyone involved in crypto.
First reported by WSJ, the write up speculated that ongoing regulatory scrutiny may be the cause for Telegram to back away from a public ICO. The SEC has sent out dozens, perhaps hundreds, of subpoenas in an ongoing attempt to slow down the manic ICO industry. Or maybe it was a simple question of why go through the hassle when a handful of global investors were willing to back the company. Today, most of the money going into ICOs is larger, institutional money.
So does this change in strategy create any problems? Dror Futter, a Securities Attorney, questioned if the investment documents were positioned to handle the about face;
“I wonder if this leaves $1.7 billion dollars worth of accredited investors wondering how they will see a return on investment,” said Futter. “Reportedly the funds were raised through SAFTs, SAFTs convert upon a “Network Launch,” which unless otherwise defined by the issuer, is defined as “a bona fide transaction or series of transactions, pursuant to which the Company will sell the Tokens to the general public in a publicized product launch.” Interesting to see if the investment documents had language to deal with this situation.”
Perhaps, since the number of investors is so small, the management team will be able to maneuver any legal technicalities. With recent reports indicating that Telegram is growing (at one point) at around 700,000 users a day – the platform may be the answer to now reviled – evil Facebook. Who doesn’t want to invest in that?
This week, over 700,000 new users are signing up for Telegram each day. The annual user growth of Telegram surpassed 70% YoY in most markets.
I used the 200M opportunity last week to write about what Telegram stands for. https://t.co/plQsq4uhAQ
— Pavel Durov (@durov) March 28, 2018
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