An equity toke offering (ETO) is an event by which companies offer equity in their stock for sale to investors in the form of equity tokens.
Equity tokens are a form of security token and store contractual information as blocks of encrypted data on their corresponding blockchain.
During an ETO, investors buy equity tokens from the issuing company, allowing the company to raise liquid capital in order to develop its business.
Because equity tokens are a blockchain-based equivalent of conventional equity certificates, equity token offerings have many similarities to initial public offerings (IPOs). Companies looking to sell equity via ETOs may subject themselves to due diligence by a third-party regulatory authority or investment bank in order to prove that they are a sound investment.
As with IPOs, a company wishing to go public via an ETO publishes an ETO prospectus ahead of the ETO launch. This prospectus outlines the terms and conditions of attached to the ETO and to the equity tokens. It may include similar terms or options to those which can be included in an IPO prospectus (a greenshoe option, for example).
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