Author: childish_phillip Source: X, @ChildishPhillip
The author started his career in the investment banking department of JPMorgan Chase, a traditional financial institution, and later joined the Listing team of Crypto CEX. This article records some immature insights in his short career.
IPO (initial public offering) and CEX (centralized exchange) listing are two completely different ways of financing and market entry, but they have the same core goals: attracting funds, attracting investors, and expanding market influence.
Although the two were born in completely different backgrounds and times, with the rapid development of the cryptocurrency industry, CEX listings have been constantly compared with traditional financial IPOs.
So, what are the similarities and differences between the two? Can CEX coin listing draw some experience from the development process of equity IPO to promote its own standardization and development?
This article will analyze these two listing methods from multiple dimensions and explore their possible intersection in the future.
I.The core goals and positioning of IPO and CEX
1. IPO: Corporate coming-of-age ceremony and ticket to enter the capital market
IPO is the "ultimate ceremony" for companies to enter the capital market, and its main goal is to attract capital to support business expansion, R&D investment or M&A plans. Companies sell equity to public investors through IPOs, and investors expect to get returns through dividends and stock appreciation. Investors participating in IPOs in the US stock market are mainly institutions, and long-term investors are the backbone of the market.
2. CEX listing: the traffic entrance of the crypto world
CEX listing is an important link for crypto projects to enter the market after issuing tokens. Usually, the project party does not conduct direct financing through CEX listing (except IEO). Its main goal is to improve token liquidity, expand market influence, attract more investors' attention and attract more users to join the ecosystem. Investors' expectations are usually more direct - to achieve capital appreciation through the rise in token prices, without having to pay attention to long-term returns such as dividends like stock holders.
II.Differences in listing and coin listing processes and mechanisms
1. Equity IPO process is relatively standardized and transparent:
The IPO process is very standardized (whether it is US stocks or Hong Kong stocks), and usually includes the following stages:
Preparation stage:The company hires an investment bank as an underwriter to prepare financial statements and business plans
Review stage:Regulatory agencies (such as the US SEC) review the company's financial status, risk disclosure and corporate governance structure
Roadshow stage:The company promotes itself to institutional investors to attract subscriptions
left;">Pricing stage: Investment banks and enterprises price the enterprise value through valuation models (free cash flow model and relative valuation model) and roadshow feedback
Formal listing: The enterprise is listed on the stock exchange and the stock begins trading
The whole process may take months to years and the cost is relatively high (generally accounting for 5-10% of the total financing amount, of which the underwriting fee of the investment bank accounts for the majority)
2. CEX listing is relatively efficient and flexible:
The process of CEX listing is relatively simple, mainly including:
Application stage: The project submits an application to the exchange, with a white paper and project information
left;">Audit stage:The exchange conducts a basic review of the project
Negotiation stage:The exchange and the project party will negotiate and finally confirm the listing fees, marketing fees (for activities) and other fees
Launch stage:The exchange announces the token launch date and provides initial liquidity to the market
Compared with IPO, CEX listing is extremely efficient, but the review standards are not uniform.
III.Differences in market dynamics and participants
1. IPO market: Institutionally dominated, strong stability
The IPO market is dominated by institutional investors, who usually evaluate the fundamentals and long-term potential of the company to make investment decisions. Because this type of investor is dominant, market sentiment is relatively stable and price fluctuations are small.
Large companies will introduce cornerstone investors (Cornerstone) in Hong Kong stocks when they go public. Cornerstone investors usually reach an agreement with the company before the IPO to ensure that they subscribe to a certain proportion of shares and agree not to sell these shares during a specific lock-up period after listing.
2. CEX market: mainly retail investors, high volatility
The CEX market is dominated by retail investors, whose decisions are often strongly influenced by news, social media and market sentiment. Some whales and market manipulation can also exacerbate price fluctuations.
Fourth,Cost Comparison
1. IPO
The cost of an IPO is relatively high, including underwriting fees (usually 6%-7% of the financing amount), legal fees, audit fees, etc., but the financing capacity of an IPO is also very strong, especially in mature markets such as Nasdaq and NYSE, where companies can usually raise hundreds of millions or even billions of dollars.
2.CEX Listing
The cost of CEX listing fluctuates greatly, usually including the exchange's listing fees, marketing fees, liquidity provision fees, and deposits.
V.Briefly on the experience that CEX Listing can learn from IPO
Although CEX listing has its own unique market logic, the mature mechanism of traditional IPO still has many things to learn from.
1.Strengthen transparency and information disclosure
IPO transparency requirements are very high, and companies need to disclose detailed financial data and business plans, which provides investors with a sufficient information basis. CEX listing can learn from this and require project parties to provide more complete information disclosure, such as:
Independent audit report of smart contracts
Disclosure of project financial data such as revenue/main costs/profits (if any)
Fund utilization plan and continuous progress and disclosure report
Team background and project development roadmap
2.Introduce institutional investors during TGE listing to stabilize market sentiment
The participation of institutional investors is the key to the stability of the IPO market. CEX listing can attract more institutional investors through the following ways:
Design specific investment incentive mechanisms for institutions (such as cornerstone investors), such as token allocation unlocked in stages
Provide stronger compliance endorsement and reduce institutional investment risks
3.Optimize the listing process and improve the review standards
Although the CEX listing process is efficient, the review standards of some exchanges are relatively low, which affects the credibility of the overall market. We can learn from the practices of IPO:
Introduce a third-party review agency to conduct a comprehensive assessment of the project technology, team background and business model; and make its evaluation report public
Formulate relatively unified review standards to improve the overall quality of listed projects
4. Improve the investor protection mechanism
The IPO market has a strict legal framework to protect investors. For example, false information disclosure can lead to serious legal consequences. CEX listing currently has the following ways to protect investors:
Require project parties to submit special deposits, which will be used specifically to compensate investors in the event of absconding or fraud
Establish a rapid delisting mechanism and take timely action on projects with problems
5.Introduce a tiered mechanism & dynamic adjustment
Crypto exchanges can learn from Nasdaq's tiered system (Global Select Market/Global Market/Capital Market) and design different trading sectors to divide projects into different categories according to their scale, development stage, liquidity, risk level, etc., to attract investors with different risk preferences. The following are some specific reference methods:
Flagship sector:Marked as "low risk, high liquidity", suitable for institutional investors and conservative investors
Growth sector:Marked as "medium risk, high growth potential", suitable for investors with a certain risk tolerance
Start-up sector:Marked as "high risk, high volatility", and investors are required to sign a risk statement before trading
Six.Summary: From contrast to integration
IPO and CEX listing represent the two worldviews of traditional finance and cryptocurrency respectively.
The former is dominated by compliance, stability and long-term, while the latter is centered on efficiency, innovation and liquidity. Although the goals and mechanisms of the two are obviously different, as the crypto market gradually matures, the standardization and transparency of CEX listings will be an inevitable trend in the future.
By drawing on the mature experience of IPOs, CEX listings can enhance market trust and stability while maintaining flexibility. I think it is more important to improve the transparency of the listing process and project pricing to alleviate the difficulties to a certain extent.
I believe that the integration and mutual learning of the two will bring more possibilities to the global capital market. This cross-border dialogue has just begun.
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