The Praetorian Group filed what appears to be the first initial coin offering (ICO) registering tokens with the SEC. It plans to raise $75 million by offering 15 million "PAX tokens" at $5 per token. Praetorian Group calls itself a Cryptocurrency Real Estate Investment Vehicle (C.R.E.I.V.). It claims that, unlike other cryptocurrencies, its tokens will be backed by real properties.
Why file?
The company admits that PAX tokens may not constitute a security that needs to be registered with the SEC, but states that regulatory uncertainties led it to preemptively seek the SEC's approval. Praetorian's S-1 filing is not structured like a typical IPO document, and does not offer the same level of disclosure.
Terms of the ICO; investment and trading
The newly-formed company is registering 15 million PAX tokens in order to raise $75 million at $5 per coin. There are 200 million PAX tokens, giving the company a "market value" of $1 billion at its proposed ICO price. The offering is not underwritten, and no investment banks, law firms or auditors are listed in the prospectus.
All tokens will be sold exclusively on the Praetorian website (praetoriangroup.io). Investors can purchase tokens with Bitcoin, Ethereum, and Litecoin. The company anticipates that the PAX token will be traded on various cryptocurrency secondary exchanges, including DEX, Binance, Bittrex, Liqui, Poloniex, Kraken and more.
Praetorian's principals will hold 65% of PAX tokens post-ICO, while advisors/employees will hold 5%. The company has designated 20 million tokens (10% of total) as part of the token sale, including the 15 million registered with the SEC. An additional 40 million (20%) are reserved for a general offering.
Rights of token holders
PAX Token holders are entitled to the net profit of real property rents accumulated based on their holdings relative to the total float of PAX tokens, paid in PAX tokens at the company's discretion. PAX tokens do not represent equity in the company, or its real estate investments.
Business plan: Acquire NY real estate, create a cryptocurrency credit card
With ICO proceeds, Praetorian plans to purchase 5 to 7 properties per month and gives a projected gross cap rate of 10% to 18%. It may also grant commercial private loans. Praetorian plans to donate to local charities and initiate community out-reach programs in the "blighted areas" it buys properties.
Starting 12 months after the ICO, Praetorian plans to leverage existing technology to offer consumers a PAX debit/credit card and mobile payment app that can convert a user's cryptocurrencies (BTC, ETH, LTC, Dash, NEO, OMG, etc.) into the local fiat currency of the region. Praetorian throws out lofty projections: It expects to go live with a working card with "1 million potential users" by December 25, 2019, ramping up to 5 million users by January 2020, and "a minimum of 10 million users" by January 2021.
Management
Co-founder and CEO Gerard Marrone is described as a real estate broker, blockchain enthusiast and practicing attorney specializing in New York real estate, corporate and criminal law, and litigation. Co-founder and Chief Strategy Officer Louis Adimando is listed as an attorney, banker and blockchain expert.
Renaissance Capital will not issue research on the ICO, and it will not be included in our ETFs (NYSE: IPO, IPOS). However, IPO Intelligence clients can access our analysis of upcoming IPOs, including next week's Zscaler (ZS). And users of IPO Pro can view the unicorn's enhanced profile and flag it to receive pricing emails and deal alerts.
