SEC promises increased scrutiny over blockchain ‘pivots’

SEC - Blockchain pivots

The SEC has specifically mentioned the practice of US companies changing their names to include the word ‘blockchain’ in recent comments.

The remarks regarding blockchain-based ‘pivots’ were made on 22 January by SEC chairman Jay Clayton, were he addressed the growing number of companies looking to capitalise on the current hype by changing their names.

Clayton said:

“I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to (1) start to dabble in blockchain activities, (2) change its name to something like ‘Blockchain-R-Us’, and (3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved.”

Clayton added that the SEC will be looking very closely at public companies that “shift their business models to capitalize on the perceived promise of distributed ledger technology”. There will be a particular focus on whether the company’s public disclosures comply with securities.

Share boosters

There have been a number of high profile blockchain-based ‘pivots’ in recent months. The effects that this usually has is a significant increase in the value of the company’s stock, leading to suspicions of short-term profiteering or using the hype around the technology to increase publicity.

It is certainly not always clear how the company changing its name is actually related to the technology.

As we previously reported, a company previously known as Long Island Iced Tea Corp saw its stock prices soar after it changed its name to Long Island Blockchain Corp. Other examples include UK-based internet software company On-Line saws its shares jump 394% after it added ‘blockchain’ to its name.

The latest company to give this kind of pivot a go is UK-based telecoms investment company Stapleton Capital. The company saw a 130% jump in share price after it announced that it was changing its name to Blockchain Worldwide.

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