Tokenized stock products are expanding access to US equities for investors in countries where purchasing shares directly is difficult, but questions remain about investor protections and true ownership rights.
Zoth CEO Pritam Dutta highlighted the appeal of tokenization for investors in markets like Nigeria and the Philippines, where buying shares in major US technology companies such as Apple and Nvidia can be challenging. However, he warned that many tokenized stock products offer only price exposure rather than direct share ownership, which can affect voting rights and dividend treatment.
"For someone in Nigeria or the Philippines, where this might be their only way into US stocks, that matters, and too few platforms are being upfront about it," Dutta said.
Dutta outlined three key questions investors should ask before purchasing tokenized stocks: who holds the real share, what happens to dividends, and what happens if the platform fails.
How Zoth's product addresses these concerns
Zoth's zMAG7 product provides exposure to seven major US technology companies through Coinbase Tokenized Stocks on Base, with allocations of approximately 14.3% each to Apple, Amazon, Nvidia, Alphabet, Meta, Microsoft and Tesla. Investments can start at $1 for eligible investors outside the US.
According to Dutta, each token is backed by a real US-listed share held by Alpaca Securities, an SEC-registered broker dealer, in a segregated account designed to protect assets from the issuer's creditors. Coinbase Onchain SPV Ltd issues the tokens from Abu Dhabi Global Market under the Financial Services Regulatory Authority, with each token representing a beneficial interest in the underlying share.
Dividend and stock split handling
Coinbase Tokenized Stocks follow a reinvestment model in which dividend distributions automatically purchase additional underlying shares. The reinvestment is reflected through an onchain multiplier that increases the redeemable value of each token without changing the holder's token balance. Stock splits follow the same mechanism.
Platform protection and redemption
In the event of platform failure, underlying shares remain segregated at Alpaca Securities. zMAG7 uses a security arrangement requiring approval from three of five keyholders, with continuous monitoring provided by Blockaid and Mitigata.
Investors hold zMAG7 directly in their wallets on Base and can redeem positions for stablecoins within two business days. The underlying tokens have publicly accessible contract addresses, allowing investors to inspect the basket's holdings.
Dutta did not specify whether token holders would be treated as secured or unsecured creditors in an insolvency proceeding or identify a legal precedent establishing their claims.
"The demand is real. The question is whether people are being sold what they think they're buying," Dutta said.
