A new US-based tokenized market for patent portfolios is slated to open later this quarter.
IPwe and Templum Markets began developing the market approximately 12 months ago to address the nascent sub-class of unregistered securities.
“We are ascribing independent value to those assets because we think that people did not understand what they were previously,” Erich Spangenberg, CEO of IPwe, told IntelAlley.
Spangenberg estimated that the market could be as large as a few hundred millions of dollars by the end of the year and possibly between $2 and $5 billion within three years.
“However, one large transaction like Alcatel’s $2.1 billion debt financing in 2012, could distort the size of the market,” he added.
It would not be accurate to say that the migration of institutional investments to unregistered securities is in its early innings, according to Vince Molinari, CEO of Templum Markets.
“At Templum, we are just building the stadium in which the game will be played,” he said. “As we continue to scale, we anticipate an increased range of regulated custody solutions that will support increased capital flow.”
In the first step towards securitizing patent portfolios, IPwe first identifies prospective clients via its internally developed AI- and Hyperledger-based tools that let the firm identify, research, maintain, and transact patents.
The firm then puts candidates through a seven-step screen process before handing them off to Templum Markets, that handles the securitization process as a registered broker-dealer.
Teleplum Markets will offer the new tokenized securities to initial investors as private placements governed by the Securities and Exchange Commission’s Rule 506 under regulation D, according to Molinari.
“We are considering expanding into Regulation S offshore offering in the future,” he added.
Telplum Markets also will operate a proprietary blockchain-based alternative trading system to facilitate secondary trading in the securities.
Qualified market participants will be able to post bids, offers, and indications of interests as well as negotiate with other market participants in the platform.
“We see interest among traditional market liquidity providers to become members of our ATS as independent participants,” said Molinari. “These entities, including market makers, typically operate in the liquid public markets. They are now looking at the unregistered securities market as a viable opportunity in which to participate.”
The companies have clients at various stages of screening and onboarding, according to Spangenberg.
“I would not anticipate that we would see a lot of the term-sheet transactions fall out of bed,” he said.