Q3 2022 distribution for SAFT Exchange Offer participants
Aug 16, 2022
by Hedera Team
Hedera is the most used, sustainable, enterprise-grade public network for the decentralized economy.

In 2020, Hedera offered its existing SAFT holders the opportunity to exchange their original SAFT for a new form of SAFT (the “New SAFT”). Those who accepted the offer tendered their original SAFT(s) in exchange for New SAFT(s), which entitled them to the same number of hbars from their original SAFT that remained unvested at the time of signing the SAFT exchange offer, plus an additional “Bonus Allocation” amount of hbars equal in cumulative value to the Purchase Amount (in USD) of their original SAFT.

The New SAFT laid out the calculation of the Bonus Allocations as follows:

Number of hbars paid each quarter as part of the Bonus Allocation =
(PPS/10) * (IPA/TPA), until the cumulative dollar value equals IPA, where:

PPS” = Prior Period Sales, i.e., coins sold by Hedera in the prior quarter (including sale of coins received through network transaction fees and sale of coins from Treasury, but excluding sale of coins withheld from employee distributions and sold to cover Hedera’s tax withholding obligations).

IPA” = Individual SAFT holder’s Purchase Amount for the original SAFT(s); and

TPA” = Total Purchase Amount for all SAFTs exchanged by all eligible SAFT holders as part of the SAFT exchange offer

Hedera also reserved the right to make additional or larger Bonus Allocation distributions, potentially fulfilling its obligations under the New SAFTs earlier than contemplated.

Prior Period Sales, for the Purposes of Calculating SAFT Distributions

To date, distributions of hbars in exchange for currency have been considered “sales” for the purposes of calculating PPS (other than sales to pay tax withholding obligations), specifically the hbar purchase agreements disclosed in previous quarters. In addition, as noted in the SAFT exchange offer documents, Hedera decided to include hbars paid monthly to Swirlds for hashgraph licensing fees as “PPS” for the purpose of calculating Bonus Allocations. 

In January of 2022, Hedera agreed to purchase the hashgraph IP from Swirlds and ceased the monthly licensing payments. On May 20, 2022, Hedera completed the purchase of the hashgraph intellectual property for 292,682,667 hbars. While such purchase is not considered a “sale” under the SAFT Exchange Offer, Hedera has decided to exercise its right to accelerate the distribution of Bonus Allocations by counting such hbars as part of PPS this quarter.

In future quarters, Hedera will apply a new policy for calculating PPS, such that transferred hbars will be counted towards “Prior Period Sales” if it’s reasonably likely that, if the costs were being paid by Hedera at the time of the SAFT exchange offer, Hedera would have had to sell the transferred hbars to raise cash to cover the costs that are now instead being paid for via such transferred hbars. It remains in Hedera’s sole discretion to determine whether any transferred hbars qualify to be counted towards PPS under the new policy.

This policy has been adopted in recognition of the changes in the ecosystem over the past few months that have further decentralized the Hedera network. The policy is expected to capture applicable portions of the payments made under the outsourcing agreement with Swirlds Labs, so that those qualifying expenses may be included in the calculation of PPS in future quarters.

Q3 2022 PPS

As mentioned above, Hedera completed the purchase of the intellectual property previously licensed from Swirlds for 292,682,667 hbars on May 20, 2022. These coins form the basis for the Q3 2022 Bonus Allocation to holders of the New SAFTs. The first Q3 2022 Bonus Allocation distribution was distributed on or about July 16th, and the remaining two distributions will be sent on or about August 16th, and September 16th.

Q3 2022 Distribution Details

PPS = ℏ 292,682,667

TPA = $75,295,076

The matrix provided here will be updated after each distribution.

Holders of New SAFTs can calculate the number of hbars they should expect to receive by entering the values above as well the Purchase Amount of their individual SAFT (the IPA), into the formula for the Bonus Allocation. In other words, an individual’s total Bonus Allocation for Q3 2022 would be equal to (292,682,667 / 10) * (IPA / $75,295,076). Hedera will distribute this Q3 2022 Bonus Allocation in the three monthly installments noted above.

As described in the SAFT Exchange Offer and the New SAFTs, Hedera will calculate the dollar value of the Bonus Allocations using the 30-day trailing average of the publicly-listed coin price on CoinMarketCap (or another third-party source that we deem to be reliable) at the time of each distribution. The USD value of each distribution will be recorded and will count toward the cumulative dollar value of the Bonus Allocations to be paid, in total, under the New SAFTs.

For example, at a 30-day trailing average coin price of $0.07, the total USD value of the coins distributed as Bonus Allocations to all New SAFT holders in Q1 2022 (in aggregate) would be $2,048,778.67 or approximately 2.7% of those SAFT holders’ original principal investment.

ℏ 29,268,266.7 * $0.07 = $2,048,778.67 (2.7% of $75,295,076)

Please note that this distribution is not indicative in any way of future distributions. We are committed to ongoing transparency and open communication and will notify the public when the next distributions for New SAFT holders will happen.

An additional 5,697,242 hbars will be distributed during this period under other agreements based on PPS but calculated separately so as not to diminish the distributions to SAFT Exchange Offer Participants.