Tether Mulls Equity Tokenization After $20 Billion Fundraising Plans

TLDR

• Tether is looking at tokenizing its equity as part of a $20 billion fundraising effort.
• The company’s planned valuation could reach $500 billion, positioning Tether among global giants.
• Tether’s Hadron unit launched in 2024 could support tokenization of its equity.
• Existing investors may need alternative liquidity options as Tether plans no immediate IPO.

Tether, the issuer of the world’s largest stablecoin, is reportedly weighing the option of tokenizing its equity following a planned share sale that could raise up to $20 billion. This move comes as Tether aims for a valuation of around $500 billion, according to sources familiar with the matter. Tokenization could serve as an alternative liquidity path for shareholders since Tether currently has no plans for an immediate initial public offering (IPO).

The company’s consideration to tokenize its stock follows its launch of Hadron, a tokenization unit, in late 2024. Hadron aims to mint blockchain-based representations of stocks, bonds, and commodities. If Tether goes ahead with tokenizing its shares, it would likely build on the foundation that Hadron has already established.

Liquidity Options and Buybacks

Tether is reportedly not allowing existing shareholders to sell into its upcoming fundraising round. The company has indicated that the current fundraising will focus on securing investment capital rather than providing liquidity to its existing investors. To address this, Tether executives are considering other methods to ensure liquidity, such as traditional buybacks.

Buybacks, a well-known mechanism in private equity markets, would allow Tether to repurchase shares from existing shareholders after the main fundraising round. Tokenized equity could offer another potential solution, enabling investors to hold digital assets representing their stake in the company. However, as of now, no final decision has been made regarding these options.

Secondary Sales and Valuation Concerns

Tether has also been involved in managing secondary sales of its stock. According to reports, the company intervened to prevent a shareholder from selling their shares at a significantly lower valuation of $280 billion, far below the $500 billion valuation it is targeting in its upcoming fundraising.

Tether’s intervention highlights the company’s efforts to maintain a controlled valuation and fundraising process. The firm issued a statement indicating that attempts to bypass the formal process were deemed “imprudent” and “reckless.” This intervention aims to ensure that the company’s valuation remains intact as it moves forward with its $20 billion share sale.

The Tokenization Trend in Financial Markets

Tether’s consideration of tokenizing its equity comes at a time when tokenization of traditional financial assets is gaining momentum. Although tokenized markets remain small compared to traditional markets, the growth of blockchain-based assets has accelerated in recent years. Tether’s involvement in this space could provide a boost to the trend, potentially creating new pathways for liquidity in private equity markets.

The company’s Hadron unit is already facilitating tokenization for other assets, such as stocks and commodities. This expertise could enable Tether to successfully tokenize its own equity, making it one of the first major companies to experiment with tokenized private stock.

Despite the growing interest in tokenized assets, the broader market for tokenized real-world assets remains relatively small, valued at around $18 billion. Tether’s decision to tokenize its stock could further stimulate interest in this sector.

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