By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 27 (Reuters) - Global trading platform INX, currently in the midst of an initial public offering using its security tokens, will acquire Chicago-based broker-dealer Openfinance Securities, INX president and founder Shy Datika said.
The terms of the deal were not disclosed. But Datika said Openfinance raised about $25 million over the last three years and current valuations put Openfinance at a range of $40 million to $70 million.
INX, registered in Gibraltar but with most of its operations in the United States, would purchase 100% of Openfinance, including its broker-dealer and alternative trading systems business, which enables investors to trade security tokens on the Openfinance platform, Datika told Reuters in a phone interview.
It will also acquire Openfinance's digital asset listings and client base.
Security tokens are digital currencies backed by a tradable asset such as real estate or equity and are subject to federal regulations. The tokens represent a right to the underlying assets.
The merger highlights the significant growth in security tokens as more companies, taking advantage of the move to blockchain or distributed ledgers that are open and transparent, seek to create their own digital currencies that comply with regulations.
The Openfinance acquisition will be undertaken through a combination of cash and future profit-sharing, Datika said.
"We purchased Openfinance because we believe that such an M&A in a very fast-growing market is the best way to move fast," Datika said.
"It will shorten the way for INX to go to the market, not only with a digital platform that is already developed, but with a fully secure trading platform as well."
INX launched in August the first security token IPO for both retail and institutional investors approved by the U.S. Securities and Exchange Commission, targeting to sell 130 million of its virtual currency at an average price of US$0.90.
The company said it expects to raise $117 million by the end of the year.
Datika said INX has so far raised more than $10 million from the IPO, and has an "understanding with a few institutional investors for tens of millions more."
The Openfinance deal is subject to the completion of definitive agreements, regulatory approvals, and other closing conditions.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Alden Bentley and Richard Pullin)
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