PreStocks: Modernizing and Democratizing Access to Pre-IPO Stocks

Ape-tizers:

• Tokenization as a crypto sector is growing rapidly.
• Users need 24/7 market access to pre-IPO stocks of private companies.
• PreStocks tokenizes private stock options onchain, creating liquid markets for users to trade them.

We are going to be one of the first to admit that crypto really doesn’t seem so early anymore. With each “GM” CT yells, we stray farther from the morning of this industry.

The line between crypto natives and non-natives is becoming increasingly blurred.

Stablecoin innovation is accelerating, consumer crypto is capturing mainstream attention, Super Apps are on the rise, and traditional companies are announcing decentralized asset treasuries (DATs) at a rapid pace.

As these occurrences continue, the inherent opportunities become even more narrow, leading more and more people to view the trenches as the only viable way to make outsized returns.

If you’re wondering why there have been so many memecoin launchpads lately and why the internet capital markets narrative popped up without any significant correlation between the tokens and the products, you have your answer.

Quite obviously, as crypto continues to mature, the hunger for compelling narratives and the outsized returns they promise has only intensified. In that rush, we often find ourselves clinging to trends that don’t quite hold up.

But nestled between the signs of an evolving industry and the growing demand for meaningful, “worth your damn time”  opportunities lies a sector that we believe is poised to capture increasing attention. None other than the tokenization of stocks, or what we like to call the pre-IPO markets.

If you’re wondering what pre-IPOs are, feel free to go through our most recent article where we described them as markets that allow participants to trade shares of private companies before their public listing through secondary market platforms.

In that same article, we discussed a handful of reasons why we think now’s the best time for the pre-IPO markets to make a comeback.

One of these reasons is that value creation has sort of moved private in recent years. We are now beginning to see private companies perform better than public companies, thereby forcing those that are private to stay private for longer.

This creates a problem whereby exposure to these private companies is limited and arduous to come by.

Thankfully, this problem itself is what sets the tone for today’s discourse, such that we are going to be examining one of the most promising solutions to this problem, called PreStocks.

We will be analyzing their approach to offering tokenized stocks, how they stand out from other competitors, the working mechanics of the platform, and why they’re positioned to lead the pre-IPO narrative.

What is PreStocks?

PreStocks is the new and fresh identity of PrePO, a decentralized protocol formerly on the Base network. PreStocks tokenizes pre-IPO stocks, bringing them onchain for seamless access by those looking to gain exposure to pre-IPO companies.

These stocks are often distributed to employees through closed-door deals, typically before the company goes public. As a result, public access is limited, and there’s no structured market for employees to trade their shares, even after the company raises additional funding and its valuation increases.

In fact, we can identify a triad of fundamental problems when it comes to private stocks:

• Their inaccessibility
• How inefficient they’re in terms of settlement
• And how illiquid they are

PreStocks opens up access to these private stocks through tokenization of the shares backed by one or more Special Purpose Vehicles (SPVs) that hold real exposure to the company’s shares.

PreStocks decentralizes access to private markets leveraging the Solana network to build a marketplace to trade PreStock tokens i.e., tokens that track the valuation of individual private companies.

At the moment, PreStocks offers exposure to SpaceX, OpenAI, Anduril, Anthropic, and xAI. More companies are expected to be added with time.

It is important to note that PreStocks tokens are not issued, affiliated with, or endorsed by the companies (like the ones mentioned above) which the tokens track.

As a new asset class, PreStocks tokens are non-prohibitive, allowing any individual to trade with a minimum ticket size of $0.01 compared to traditional pre-IPO brokers with a 100 to 250k benchmark.

On PreStocks, large institutional buyers will require a one-time KYC in order to be able to mint and redeem their tokens. However, smaller holders can proceed to buy and sell onchain without needing to KYC.

Alongside, there’ll be no KYC required in the usage of PreStocks tokens across DeFi, where stock tokens can be used as collateral to obtain loans or could be lent out to generate yield.

Given that the PreStock market is built on Solana, users will be able to access PreStock tokens 24/7, with zero management fees. However, a one-time fee is charged to mint/redeem PreStock tokens.

How PreStocks works?

The best way to understand how PreStocks works is to think of it as a backstage pass to the world’s buzzing private companies before they hit the big stage.

Each token is 100% backed by a real slice of equity, held through a basket of SPVs that actually own shares in companies like SpaceX, OpenAI, and Discord.

Like we said before, owning PreStocks doesn’t mean you get boardroom seats or voting power; however, you do get the right to redeem your tokens for USDC at fair market value, giving you real economic exposure to the next Figma.

Since the PreStocks protocol is deployed on Solana, PreStocks tokens are SPL tokens. Users can lend them, borrow against them, toss them into liquidity pools, or package them into index and leverage products.

Liquidity for PreStocks token will be added to available DEXes, allowing users to buy and sell instantly on platforms like Jupiter and Raydium.

However, if you’re holding a big chunk, you will be able to redeem directly for USDC at secondary-market value by putting in a request, even if the company never IPOs.

Here’s how it works:

• The user submits a redemption request. To do this, the user has to be a KYC-approved user. Then they can send an email to PreStocks with the following details:
  
  • User’s wallet address
  • The specific PreStocks token the user intends to redeem
  • The number of tokens the user is redeeming (which must meet a minimum USD value)
  • The lowest per-token valuation the user is willing to accept
    
• If the user’s request is valid, they’ll receive a wallet address to send a non-refundable processing fee in USDC. Once received, the user’s specified tokens will be frozen to lock in the redemption.
  
• Next, the SPV will proceed to sell the shares
  
  Here, SPVs will attempt to sell the equivalent equity exposure on off-chain secondary markets. Sales start with the riskiest holdings and aim to meet or exceed the user’s stated price floor.
  
• Finally, the user will receive their USDC, sent directly to their wallet. After which, the corresponding PreStocks tokens will be burnt permanently.
  
• If the full redemption can’t be completed, the user will receive a proportional payout, and the unfunded portion of their frozen tokens will be released back to their wallet.

When it comes to pricing, PreStocks manages token pricing through arbitrage. What this means is that in a situation where the token price drifts too far from what the company’s actually worth is in the secondary market, savvy traders will step in to either mint or redeem tokens and close the gap.

On top of that, third-party attestation reports keep everything transparent and verify that every token is fully backed. PreStocks are issued under Regulation S and available only to non-US investors in supported regions, with KYC required for minting and redemptions.

PreStocks vs. the competition

While it would really be cool to be the only product offering tokenized private stocks, PreStocks contends with a few other platforms.

However, PreStocks stands out from other tokenized private stock offerings in how it prioritizes accessibility, flexibility, and composability across DeFi.

For PreStocks, the target is to cement its value within the fastest growing segment of the entire tokenized stocks market.

When compared to the likes of Republic and Robinhood, which impose lock-up periods, transfer restrictions, and limited redemption options, PreStocks offers on-demand redemptions, unrestricted onchain transferability, and active pre-IPO secondary trading on both decentralized and centralized exchanges.

On PreStocks, there will be no accreditation or investment minimums, no caps on how much you can purchase, and no mandatory holding period, making it far more open and fluid than its counterparts.

Additionally, despite the fact that the use of SPVs for exposure is a common theme with PreStocks and its competitors, it is, however, only PreStocks that gives you the ability to redeem tokens at any time for USDC, not just at IPO or liquidation.

Concluding thoughts

Thanks to the recently announced “Project Crypto” by the US Securities and Exchange Commission, we can posit that the stars are indeed aligning, preparing crypto for a broader spectrum of assets thanks to tokenization.

PreStocks fits perfectly into this shift. As a protocol, it fills a critical gap in the tokenization sector by giving onchain investors seamless access to value that’s traditionally been locked away in centralized, illiquid markets.

In short, it’s the bridge between the world of high-growth private companies and the open, composable future of crypto.

Since launch, PreStocks continue to see upward metrics with holders increasing and volume piling up with over $3 million in volume done since it went live on 7 August.

Though it’s still early days for PreStocks since its recent pivot, the journey that led here matters.

The team’s experience navigating the tokenized assets sector has shaped a sharper, more refined approach, one that goes beyond simply wrapping private stocks in their tokenized form to offering a more efficient structure around how they’re accessed onchain.

All I’m going to say is: don’t sleep on this one.