The day after I recommended Amazon (NASDAQ: AMZN) I received several angry emails and a few with threats. I had threatened the conventional wisdom and a lot of people demanded I retract the article. I didn’t. Had you bought $1000 of Amazon back then it would be worth $15,535.76 today - a 37.32% annualized return.
Two things didn’t happen after that and I’m still upset about it. First, I never received a single apology email from the peanut gallery. Second, I didn’t take my own advice to buy Amazon. Why? Because I had two separate trading accounts and the one that was liquid wasn’t approved for futures trading. Had all my funds been in a single account that was approved for futures trading, I’d be a little wealthier today.
The reason I had two separate trading accounts is another discussion for another day. But when I was introduced to a new company called Ankorus, it reminded me of that situation and it reminded me of my current situation – that I still have two trading accounts. One for crypto trading and the other for securities.
Ankorus claims to be the first approved securities broker to allow trading in cryptocurrencies and securities from the same account. A kind of Coinbase meets Etrade model. The company was born out of Ankorus CEO, John Cruz’s frustration with being forced to trade out of two separate accounts one for securities the other for crypto.
“Companies like Etrade and Charles Schwab haven’t done this yet because they probably have 20 lawyers in a room telling them not to do it,” Cruz told me, “We’re building this for ourselves, and we know people are going to love it.”
To fund his new venture, Ankorus is turning to the controversial Internet Coin Offering (NYSE:ICO) market to help raise funds. In an ICO, you don’t receive stock or equity, you get utility tokens that Cruz likens to American Express points. The tokens can be used to pay for commissions, investment research reports, and education programs on the Ankorus platform.
During the 30-day ICO, Ankorus is issuing 50 million tokens, with a total supply of 100 million. The ICO period started on November 25th and will run through Dec 25th, 2017. Once you pay for them, the Ankorus tokens are immediately issued via a smart contract directly into your account.
Cruz chose an ICO instead of a conventional form of fundraising because he believes the crypto community will help him nurture and grow the company due to the benefits Ankorus is offering them.
Ankorus also offers fractionalized securities trading. For example, if you can’t afford Amazon because it’s trading at 1195, Ankorus will allow you to purchase fractions of its share in increments as low as five dollars. No doubt this will appeal to a crypto community that is already accustomed to that.
I can see the peanut gallery wringing their hands and raising their brows because the fractionalized model has failed to gain hold in the past because of the associated low margins. But according to Cruz, he’s looking to appeal to his target audience - Millennials. And Millennials can’t afford $1200 stocks.
When you look at an ICO, you must look at three things: The business model, the team behind it, and the economics of the token. They are like a three-legged stool, if any one of them is weak, your investment drops to the floor.
The people that don’t understand this concept are the ones who lose the most money in the crypto space. I see this every day and I doubt the laws of the ICO universe are going to change anytime soon.
The Business Model: While easily duplicated by other security brokers, there is an advantage to being a first mover. Ankorus will need to outpace these established brokers by out-innovating them while staying within current securities laws. That won’t be easy, but will be required if the company wants to win in the long term.
The Team: No doubt Cruz is an old pro and he’s surrounded himself with established members of the crypto community. But can the two co-exist peacefully? Time will tell, but I like what I see.
The Token Economics: Using the token to pay for and receive discounted trading commissions is a solid move. I also believe the American Express points model is a smart analogy, but Cruz and team will need to go well beyond the ability to use tokens to pay for commissions, education programs and research reports before their token will be perceived as a long-term buy and hold. Cruz hinted that he’s thought a lot about the future of the token and I’m confident the team around him will innovate here.
I suggest they double down on their efforts to turn their token into an American Express points equivalent and quickly sign partners that appeal to the crypto community. The more partners and options your token holders have, the higher the perceived value. There’s huge token upside potential if that happens.
Verdict: Short-Term Buy then study what the team does to bring value to the token and community.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.