IEO investors lose millions as the funding mechanism fails to deliver

Initial exchange offerings (IEOs)—the exchange-led rebirth of the ICO—are dead, and for good reason. 

According to data from Longhash, the average return on investment (ROI) from IEOs, running this year on the top 11 IEO platforms, was minus 80 percent. That means the average investor who put in $1,000, is now left with just $200.

The biggest offender was crypto exchange Coineal. It had the largest number of failed IEOs with an average ROI around minus 60 percent. The most disappointing platforms were Probit and p2pb2b, with average ROIs below minus 90 percent. And this analysis doesn’t even include all those IEOs that already flatlined or shut down before the period surveyed.

But it wasn’t all bad; four exchanges had positive ROIs. Binance led the pack with an average ROI above 200 percent, largely spearheaded by its BitTorrent IEO, that raised $7 million in 15 minutes.

But even so, the top-performing IEOs had nothing on the ICO frenzy of 2017, where tokens jumped skyward for seemingly no reason. However, many of those tokens have since slumped back to their pre bull run values—such as XRP, which is now back below $0.26. Cryptomania it seems, is over, for now.

In fact, 95 percent of investors would have been more successful putting their money into Bitcoin. Longhash pointed out that only four IEOs outperformed Bitcoin this year—which rose from $4,000 to its current value of $10,860. While IEOs haven’t lived up to the hype, many have left investors reeling. 

The fledgling Bitpanda IEO was supposed to catalyze its global expansion, but rather produced a bunch of unhappy investors. Its IEO for its native token BEST was launched earlier this month, raising €43 million ($48 million)—Europe’s largest—but has already flatlined. Investors are down 35 percent.

On top of that, Coineal has come under fire recently for reneging on the CYBR IEO. The exchange refused to give CYBR its portion of the $2.2 million raised in its IEO. When it kicked up a stink, it refunded the money back to investors but refused to give CYBR back its listing fee, some $143,000.

So, it’s a mess on the unregulated side of things. But what about the regulatory-friendly security token offerings (STOs)? Well, nothing much has been happening there. According to market intelligence platform Inwara, STOs accounted for just 0.28 percent of crypto-related fundraisers. So, does that spell the end for fundraising in crypto? Or is it time to go back to the traditional venture capital model? Either way, the IEO is dead in the water.