The Merkle

Kakao Prepares to Launch Reverse ICO

It has become apparent that companies tend to take the ICO funding route these days. If the Telegram ICO is any indication, the focus is now on issuing native tokens to sell to VCs and accredited investors. It seems Kakao wants to do the exact same thing, and it’s labeled its crowdfunding effort a “reverse ICO”.

The Rise of the Reverse ICO

It is quite interesting to see how mainstream companies are trying to tackle the ICO industry as of right now. More specifically, companies – mainly tech giants – are more than eager to issue their own digital tokens these days, yet they are not embracing the more traditional ICO model we have grown accustomed to in the cryptocurrency world. Instead, these offerings are not appealing to cryptocurrency users, as they mainly aim to raise money from traditional VCs and investment firms.

While there is nothing wrong with this approach, these offerings have nothing to do with initial coin offerings whatsoever. Indeed, the similarities between these reverse ICOs and traditional IPOs have only become more apparent over time. By making these token sales inaccessible to the general public, it has become evident that companies such as Telegram have no intention of attracting unaccredited investors.

It now seems Kakao, one of the major Asian giants, is trying to do the same thing. Its goal is to create a wholly-owned subsidiary to conduct various businesses, including a reverse ICO. As such, the Kakao Coin will be created in the near future, although it remains to be seen how many of these tokens will be up for sale. There is also a plan on the table to create the Kakao Blockchain company, although it remains unclear if that will be the final name for the reverse ICO arm.

While it is commendable to see companies such as Kakao embrace the “reverse” ICO model, it is evident this has very little to do with initial coin offerings. Instead, it is just a fancy name for an IPO, but without being traded on traditional exchanges. Instead, this approach is a hybrid of ICOs and IPOs, although the general public has no say in the matter. For now, the specifics of this potential token sale remain unknown, though more information should become available in the next few days and weeks.

It is not unlikely that we will see more companies embrace the reverse ICO model in the future. Since companies are looking for new ways to raise money without issuing stocks to investors, the token model seems to offer an interesting solution. It all depends on what “rights” are associated with the token which investors purchase. Some might grant voting rights or dividends, whereas others may represent a tokenized version of company shares. It is unclear which route Kakao plans to take.