A Primer on Securities – Part I

 

Securities is a word that is used in the financial field to define a type of document that ensures the participation of a person or institution in a business belonging to another person or institution.

This participation can be accessed in three ways:

  • as a shareholder or owner of a venture
  • as an investor of an investment fund
  • as an institution creditor

The issuance of securities shall be denominated in each case:

  • Type A: Shares
  • Type B: Units
  • Type C: Bonds

Shares
Case A in securities (participation as a shareholder of an enterprise) is what is known as the issuance of shares of a company.

Shares are a participation in the ownership of a company. That is, the “holder” of such shares becomes the owner of a percent of the company. This may or may not include the right to vote in shareholder assemblies.

The company can, in turn, own tangible assets (land, buildings, machinery, vehicles) or intangibles (intellectual property, client portfolio, licenses, others).

Shares usually pay dividends.
A dividend:

  • is a portion of the company’s profits
  • as such, it is variable, because it depends on the result of the business in a given period (month, quarter, year)
  • it is paid in fixed dates (monthly, quarterly, annual)

Case A (issuance of shares of a company) involves at least processing the following data:

Company data:

  • company brand
  • company trade name
  • registered number
  • jurisdiction in which it operates

If there is “tokenization” (digitization using blockchain, I will talk about this in another article) the data of the token issued as a share must also be processed:

  • token name and token address
  • number of tokens issued (example: 100,000 tokens) (with the following issuing options or issuing modes that would be offered to the issuer of the token)
  • Option 1 – FixedSupply: all tokens are issued at once
  • Option 2 – MaxAndBurn: use a maximum supply with mint (creation) and burn (destruction) functions and a total supply
  • Option 3 – MaxNoBurn: same as option 2 but without using the burn (destruction) function
  • participation rate: participation in the total share package represented by the tokens (example: 100,000 tokens can represent 100% of the share package share package, or 50% of the share package)
  • if tokens give voting rights voting rights

The data for dividend payments to be executed must also be considered:

CALENDAR of dividend payments (monthly, quarterly, annual)

  • This calendar will be linked to dates, which should be calculated by the system. The issuer simply chooses between monthly, quarterly and annual. These dividends are paid after the token passes the presale and sale stages, and reaches the stage of free marketing in the market
  • Monetary result of the period to be paid, in percentage (it is dependent on the business result, which is expressed as a rate of return, and cannot be calculated on the blockchain)
  • Payment to be made to each token holder where the calculation is made as follows:
    Total capital per PERFORMANCE RATE (example: $ 1,000,000 for 10% = $ 100,000)
    the dividend is prorated on the QUANTITY OF TOKENS (example: if there are 100,000 tokens there is 1 dollar for each one, that is, it is divided by the total amount of tokens issued, and then multiplied by the amount of tokens of each holder)
    Example: on an investment of $ 100,000, payments proportional to performance are received
    Total investment 1,000,000 dollars / individual investment 100,000 = PARTICIPATION RATE is 10%
    quarter 1, yield 10% => 100,000 => 100,000 / 10 = 10,000
    quarter 2, yield 2% => 20,000 => 20,000 / 10 = 2,000
    quarter 3, yield 5% => 50,000 => 50,000 / 10 = 5,000
    quarter 4, yield 7% => 70,000 => 70,000 / 10 = 7,000
  • The actual returns per quarter reach the blockchain by means of an oracle (I will speak about this on another article)
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