Transfer Agents Beware – Blockchain Stock Ledger Systems are Coming to Get You

In March of this year I wrote an article called “A Paperless World”. The premise was that inefficient paper systems are not only wasting our time and money but actually destroying the planet. It still irks me, almost on a weekly basis, that this stupidity continues.

In the second to last paragraph I made the statement that “GLX is going to redesign a futuristic stock certificate so that with one click an investor can download and save, or print, a PDF file certificate representing that particular ledger entry.” I am proud to say that within the last four months we have executed on that very nicely. All GLX shareholders can now view their transaction history in their personal GLX Vault within their GLX profile. With one click shareholders can view the details of individual issuances and with another click pop open a certificate representing that issuance. Said certificate can be downloaded or printed with a third click.

Public companies and very often private companies raising money work with transfer agents to track the issuances and movement of their securities and handle shareholder relations issues relating to such. Over the years GLX has had relationships with many different transfer agents. All of these relationships have been extremely expensive and have ended in severe pain. In the old days, four months ago, when an investor’s check was received for the purchase of private placement stock the following would occur:

  1. GLX would record an entry in a spreadsheet to try and independently track all issuances.
  2. GLX would likely make a note or update in that investors record in our database. Both 1 and 2 have no coordination or ties to the external transfer agent’s records.
  3. GLX would have to notify the the transfer agent requesting the issuance of a paper certificate.
  4. Resources are wasted and printing presses role.
  5. Now the certificate is either FedEx’d or mailed to the shareholder.
  6. The FedEx goes out.
  7. Hopefully the shareholder happens to be home and the FedEx gets delivered.
  8. At some point maybe someone from GLX will call the shareholder to make sure they received their certificate.

I do not hold my breath waiting for anything to show up in the mail so assuming FedEx is involved the cost of each issuance using the above is somewhere between $35 and $100 per-issuance. In this article I will not even delve into the world of inefficiencies that follow when that certificate needs to inevitably be FedEx’d back to the transfer agent to remove the legend or for any other action. I also won’t harp on the amount of wasted time, energy, money, and resources involved in this entire broken process.

In the new world when an investor’s check is received the following occurs:

  1. We log into the GLX back office database and create a record for that particular issuance.
  2. Our system automatically emails the shareholder a confirmation that the issuance has been recorded and that they can go to their profile at GLX.com and view the transaction and the related certificate in their GLX Vault.

The time it takes to enter this issuance in the database is less than 2 minutes. Our cap table is automatically updated and can be viewed within one second after saving the transaction. Our back office database is in sync with the front end of our website and the shareholder can access the transaction immediately. There is no unnecessary people, time, energy, money, and resources wasted on this new intelligent method.

Last week I was demonstrating the effectiveness of the GLX shareholder module in our database and came up with the idea of recording each issuance on a blockchain for transparency. Our system already simplifies the tracking and management of the shareholder issuance process. If GLX has removed the pain from the process and solved the problem for us perhaps there is an opportunity to bring this technology to other companies. In the future, adding these transactions to a blockchain may open up new opportunities for trading and investing. It may also give companies the opportunity to interact with their shareholders in a different way and vice versa. All of which will be done on the GLX platform.

Recently Delaware voted in favor of allowing the storage of corporate records, including stock ownership, transfers and voting on one or more blockchains. We have been thinking of this idea for some time but all of the above evidence finalized our decision to set up GLX Transfer & Trust, as a subsidiary of GLX, and to file a Form TA-1 with the U.S. Securities and Exchange Commission (SEC) to register as a transfer agent to provide these services first for our self and then for others. We are going to begin building our own private blockchain to facilitate this effort.

Once again we are going to a whole new age and are working hard to be on the bleeding edge of disrupting broken and inefficient areas of the fintech industry.