SpaceX stock token sale blows up after xStocks failed to deliver shares

Several crypto exchanges that pitched tokenized SpaceX stock exposure to users ended up issuing apologies and refunds after xStocks failed to deliver enough underlying shares, turning one of the loudest tokenized-equity launches into a stress test for the whole model.

Bybit's first SpaceX tokenized IPO offering ended with no allocations, full refunds and a tiny interest-style payout after xStocks failed to deliver the underlying assets.

Bybit said in a Friday, June 12, post on X that users who subscribed to its SpaceX IPO Express product wouldn't receive SpaceX allocations because xStocks, which Bybit has described as a strategic partner for tokenized stock products, faced with "inability to deliver the underlying assets."

• Bybit said 100% of subscription funds would be automatically refunded to users' original funding accounts, with no action required.
• Eligible participants will also receive an additional reward based on a 10% APR over a fixed four-day period, which works out to about 0.11% of the subscribed amount before any platform-specific details.
• The exchange didn't provide details on why xStocks failed to deliver the assets, how many users subscribed or how much money had been committed.

Binance and Bitget Wallet also canceled SpaceX-related tokenized IPO allocations after the same share shortage. The platforms said users would be refunded, with some also offering additional compensation.

• But the same SpaceX-linked product still seems to be available on Kraken, OKX DEX and other platforms, though it's not clear why Bybit, Binance and Bitget Wallet didn't receive enough allocations as xStocks made no public comments on the matter by press time.

What users thought they were buying

Kraken describes xStocks as tokenized representations of real-world stocks and exchange-traded funds, with each token backed 1:1 by the underlying equity.

But the legal fine print matters. For instance, Bybit's own IPO Express terms said xStocks holders don't receive shareholder voting rights or dividend rights. Moreover, they have no direct legal or beneficial ownership interest in the underlying shares and hold no claim against the issuer.

Not real shares

Tom Farley, chief executive of crypto exchange Bullish and a former president of the New York Stock Exchange, mocked the development in a June 12 post on X.

"In other synthetic token news, an exchange says they can't get their synthetic token holders real exposure for a company going public on another exchange because, well, the synthetic tokens turned out to be not real shares," Farley wrote.

He added that "maybe tokens should actually be approved by the issuer and therefore be the actual underlying share."

Meanwhile, Robert Leshner, founder of Superstate, a tokenized securities startup that also competes in the broader market for putting traditional assets on-chain, described the failure as a problem with third-party wrappers.

"These IPO failures are the inevitable result of third-party platforms trying to 'wrap' or 'middleman' securities, instead of issuer-sponsored tokens," he wrote on X.

• The Wall Street Journal earlier reported that xStocks saw more than $1 billion in customer interest before running into a supply issue and failing to secure enough underlying SpaceX shares for partner platforms.