Today Broadridge announced that it has adapted its existing shareholder disclosure and proxy voting platform to enable holders of Ondo Global Markets’ tokenized stocks to participate in voting. From a functional point of view, that’s a real value add. But as the legal documents reveal, this is not proxy voting for the underlying stocks. It again highlights the challenge of many different types of securities with varying rights being labeled as ‘tokenized stocks.’
The catch alluded to in the headline is that if you own an Ondo tokenized stock or ETF you have neither ownership nor voting rights in the underlying stocks, which is clearly stated in the prospectus at least half a dozen times. What you own is a loan note issued by Ondo Global Markets (Ondo GM), an unregulated BVI entity. Ondo GM buys and owns the corresponding stock as collateral so the loan note tracks the stock price. The tokens are explicitly not available in the US.
It’s great that Ondo is providing voting capabilities, but the rights actually relate to the structured loan note, not the stock. The announcement’s fine print concedes the point. The voting capabilities are “rights to express preferences to the issuer of Ondo GM Tokens regarding voting of the shares that the issuer beneficially owns.” So the token holder is simply stating a preference, and Ondo GM can choose whether or not to vote accordingly. They have no legal obligation to follow the preference, unlike a proxy voting structure. Ondo GM could choose to add this obligation in the prospectus, but that’s not currently the case. The result is a risk that token holders might conflate “voting” for the loan note with ownership of the underlying stocks.
“By working with Broadridge, we are enabling holders of our on-chain tokenized stocks to access governance and voting capabilities, with all the additional benefits on-chain tokens provide,” said Matthieu de Vergnes, MD, Global Head of Institutional at Ondo Finance. “Ensuring that our clients can participate in corporate governance is another step forward in our goal of bringing institutional-quality financial products on-chain.” This statement is by Ondo Finance, which is a minority shareholder in Ondo GM, not the issuer itself. Flux Finance Inc owns 90.01% of Ondo Global Markets, the entity that actually issues the loan notes.
Article continues …
Want the full story? Pro subscribers get complete articles, exclusive industry analysis, and early access to legislative updates that keep you ahead of the competition. Join the professionals who are choosing deeper insights over surface level news.
