Singapore XM Studios raises S$4.5 million in tokenised fund raising

Singapore design firm XM Studios, famed for its handcrafted art collectibles of superheroes and supervillains, raised S$4.5 million in the form of exchangeable notes on Addx, a digital securities platform.

The exchangeable notes or digital tokens raised will be used by XM Studios to expand its premium mass collectible business in new markets. It will also fund the acquisition of new intellectual property licences and for general working capital.

Heliconia, the Temasek-linked investment firm, anchored the deal with a S$1 million investment. The rest of the offering, which was subscribed 1.75 times, was picked up by Addx accredited investors.

The tokenised notes will be redeemable in shares in XM Studios “at a significant discount under specific liquidity scenarios”, said a joint media release by Addx and XM Studios.

If not redeemed within 18 months, the notes will mature at an interest rate of six per cent per annum which benefits investors who want the money but not the equity.

Founded in 2012, XM Studios is a home-grown global design studio specialising in the creation of premium collectibles including characters from Marvel, Star Wards and DC Comics. Hand-crafted and hand-painted each costs between S$1,000 and S$6,000.

In 2020, its revenues more than doubled to S$16.9 million from S$7.9 million the year before, recording a net profit of over S$4.2 million.

This deal is significant because a privately held company tokenised its fundraising efforts, one of the first to do so here. Addx provides the blockchain and smart contract technology to automate the processes and reduce dependence on intermediaries.

The key benefits for investors are access and liquidity. With fractional sizes enabled by security tokens, a much larger group of investors now has access to the private offering. In addition, trading enabled by the ADDX secondary exchange gives investors a pre-maturity liquidity option not open to investors in a similar deal that is not tokenised.

The benefit to tokenising securities clear. It is simply a more efficient process. Transactions all take place on the blockchain, the matching of bids and asks, and the execution of smart contracts at various points in the life cycle of the security including dividend and coupon payments, and trading and settlement. Even the interest payment at the end can be automatically executed by the blockchain and the funds deposited in investors’ accounts immediately.

In the traditional approach, these would be manual processes managed by intermediaries.

The digital tokens are now listed on the Addx platform where they can be traded by all accredited investors who can use SGD, JPY, USD and Euro for trading.

As a new method of fund raising for private markets, tokenising securities allow for smaller sums, S$10,000 in this instance, to be accepted. Otherwise in a deal like this for a private market, the typical minimum investment would be S$1 million.

By allowing fractional access at a minimum investment of S$10,000 , “it would provide long-time XM Studio fans to take part in the next growth of the company”, said XM Studio CEO Ben Ang in the joint media release.

Trading for the tokens which are open to all Addx accredited investors can go below the S$10,000 mark because of the efficiency of the blockchain.

Addx chief commercial officer Oi Yee Choo said that the digital tokens and other equity linked products offer investors a chance to diversify their portfolios through companies that are experiencing faster growth.

Formely known as iStox, Addx is based on blockchain technology. It uses a private, permissioned version of Ethereum. The company is licensed by MAS.

Founded in 2017, Addx is backed by Singapore Exchange, Heliconia Capital and Japanese investors JIC Venture Growth Investments and DBS.

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