eBusiness Weekly
By Jeffrey Gogo
It wasn’t what Golix was hoping for. Or what many expected, really. The expanding Zimbabwean digital currency exchange reported recently that its $32 million token sale was under-subscribed by 35 percent — but that still outperformed analysts’ predictions.
Investors bought only 415,5 million of the 637,1 million Golix tokens (GLX) on offer, according to company chief executive Tawanda Kembo.
Kembo did not provide detail on the actual amount raised, but we can estimate the figure to be about $21 million. Promotional discounts and give aways are likely to have diluted the final amount.
The Golix initial coin offering (ICO) – a kind of fundraising by way of creating a new digital currency that is sold to the public — launched on June 1 amid a cloud of uncertainty.
Two weeks earlier, the Reserve Bank of Zimbabwe (RBZ) had announced a ban on cryptocurrencies, exactly 24 hours before the Golix offer was originally scheduled to open.
Bearish outlook
Pundits interpreted the surprise move by the RBZ, which cited exchange control violations, as a plan to frustrate the ICO, to stop it in its tracks.
Central bank governor John Mangudya later described the multi-million-dollar token sale as “a pyramid scheme”, while responding to a court challenge, by Golix , over the ban.
The matter is still pending at the High Court, even though the cryptocurrency exchange has won temporary relief to resume trading.
But, perhaps, the greatest effect of the RBZ ban on the initial coin offering was how it cast doubts over the participation of investors from Zimbabwe, Golix’s biggest and primary market.
At the time of the ban, the number of people buying and selling digital coins like bitcoin, ethereum or litecoin on Golix had soared from a few hundreds to 50,000 in a space of just over two years since it began operations here in September 2015.
In that period, cryptocurrency investors exchanged about $20 million worth of bitcoin on the Harare-based trading platform, the company says.
It is the Zimbabwean market that was largely expected to be the backbone of Golix’s first, and indeed, Zimbabwe’s first, tokenised capital raise.
But the ban left thousands of old and prospective investors on tenterhooks, and with it the fate of the token sale.
Golix’s failure to reimburse people the tens of thousands of dollars of both cash and crypto — much of it still unpaid to this day — it kept on the exchange also fuelled the bearish outlook.
Analysts became pessimistic, frayed by the evidence of an unresolved court case on the one hand, jittery investors on the other, and an air of uncertainty in the domestic market.
They guided the token sale to fail, at best raising only a few million dollars, on account of the Zimbabwean market, which appeared virtually lost.
Gamble pays off
But Kembo, the Golix chief executive, took a gamble, stuck to his guns and pressed ahead with the initial coin offering.
He ostensibly targeted those Zimbabweans who still believed in his vision of financial freedom through cryptocurrencies, and others across Africa, particularly South Africa, Kenya and Uganda, where the exchange had quickly opened shop.
Kembo expected to raise the full $32 million on offer – obviously – but under the circumstances, it does not look like the 31-year old software engineer would be too displeased with the outcome – an estimated $21 million raised.
In the end, none of the expectations proved true, and that’s not a very bad thing.
Golix underperformed its own planned forecasts, but the ICO came better than what analysts had guided.
The initial coin offering ended July 25.
The GLX will initially be listed on the Golix exchange on August 14, mainly as a transaction token — useful only for paying exchange related trading fees.
“We are also in talks with other exchanges about making the Golix token tradable there. . .” Kembo said, who hopes to expand the token’s usefulness in future.
Investors were expected to start receiving the GLX tokens on their ethereum addresses on August 1, said Kembo.
Those unsold, about 221,6 million, will be shared over a four-year period among those that subscribed to the ICO, in the ratio of the number of GLX tokens held at the end of the sale.
In an initial public offering, the more common way of raising capital by publicly listed companies, which is what an ICO imitates, unsold shares tend to be mopped up by an underwriter, ensuring that the offer raises the full amount on offer.
“Unsold tokens will be locked in a smart contract and will be distributed to tokenholders that opt to lock their tokens too in this smart contract,” Kembo said, in a statement.
There’s no surety that investors will make money from participating in the ICO.
But the idea is that the tokens they obtain through the initial coin offering will increase in value as Golix, which reported revenue increase of more than 6 200 percent to $158 000 last year, implements it’s growth strategy.
The exchange has even promised to boost that value by repurchasing up 50 percent of the issued coins — buybacks typically create a sense of artificial scarcity, causing asset prices to rise.
“Because the GLX token will be easily tradable against various African fiat currencies for zero fees, we’re going to start to see better, transparent and alternative ways of calculating inflation rates of African fiat currencies, moving value across African borders, better exchange-rate discovery . . .” Kembo explained.
