South African startup ProsperiProp plans to hold two initial coin offerings (ICOs) for investors to invest in international property — with the first next Friday, 8 September — to get around South Africa’s lack of crowdfunding regulations.
Traditionally investors need to put down tens to hundreds of thousands of dollars to invest in property, but ProsperiProp wants to give the man on the street a chance to invest in property
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The startup’s founder and CEO Llew Morkel said the first ICO will be aimed largely at international investors, using a cryptocurrency created by the company, called “PROPX”. The ICO aims to raise between $60-million and $120-million in PROPX tokens, valued at one dollar a piece. The company will itself retain $80-million of tokens.
The idea (explained in depth in a ProsperiProp white paper) is that following the capital raising, which is likely to take place from 1 November reckons Morkel, ProsperiProp will then buy shares in various international property portfolios.
We said we’re going ahead and doing our crowdfunding with an international audience, most probably with a Mauritian entity, says ProsperiProp founder
The startup — which is a member of Alphacode, a fintech incubator funded by Rand Merchant Investments — will then run a second ICO to then give South Africans the chance of acquiring another token called TREE, sold d for about $2 each.
The TREE-token owns 90% of the asset and dividend value of the special purpose vehicle (SPV) funded by the initial PROPX tokens sale.
If every single person buys only five TREE tokens a year at $2 each the potential market potential over ten years is $200 billion
Morkel said the startup has resorted to using two ICOs with two different cryptocurrencies because equity crowdfunding (which is what the ICO essentially amounts to) is currently not regulated by the Financial Services Board (FSB) in South Africa.
“You are not allowed to crowd fund for something that doesn’t exist yet,” he said. He pointed out that doing so would contravene South Africa’s Collective Investment Schemes Control Act.
To avoid concerns from the South Africa’s financial regulator, the proceeds of first ICO will be returned to a Mauritian registered holdings company. These will then be transferred as a loan to the South African company against the Mauritian company.
“We said we’re going ahead and doing our crowdfunding with an international audience, most probably with a Mauritian entity,” he said, adding that the startup had registered a holding company in Mauritius.
He said should the second ICO not come off, because of regulatory hold-ups or concerns from the FSB, shareholders could always opt to sell off their shares held in the property stakes purchases from the proceeds of the first ICO.
Morkel said he and his team — who include Rebalance Fund Managers CEO JB Smith, management strategist Thembi Kahimbaara, and cryptocurrency aficionado Ernst Naude — have spent the last six month ironing out legal issues around running an ICO in South Africa.
“We’ve had interactions with lawyers who said it is such a grey area,” Morkel said.
He said to ensure strong oversight, one of the world’s top five auditors has been appointed to audit the company.
Morkel stresses that because the new tokens won’t be tied to the volatility of cryptocurrency exchanges, it will offer investors medium to long term, stable growth provided by high quality property portfolio.
Featured image: Llew Morkel (Supplied)