Bitcoin Company’s IPO Precedes Attaining 13.4% Mining Market Share by March 2016

Australia’s largest mining operator, Bitcoin Group Limited, recently announced that it has received approval from the Australian Securities and Investment Commission (ASIC) for an Initial Public Offering (IPO), and listing on the Australian Securities Exchange (ASX).

“On behalf of the Directors of Bitcoin Group, I am pleased to present to you, the opportunity to become a shareholder in Bitcoin Group Limited, which presently is set to become the world’s first Bitcoin IPO on a major global exchange.”
— – Andrew Plympton, Bitcoin Group Chairman

The company currently has three key investors; Harry Wang, Managing Director of ANYING, Australia’s third largest money remittance company; Victor Huang, Managing Director of OzYu Entertainment & Investment and OzStudy Group, an international education recruitment service and media agency; and Richard Gu, Managing Director of AXF Group, a conglomerate investment company that spans from real estate development into entertainment services.

The company plans to raise AU$20m, offering 100 million shares. The offer opens on Sept 4 and closes on Oct 30 with an expected settlement date of Nov 4. Trading on the ASX is expected to commence on November 11, with a proposed symbol of BCG.

“The proposed IPO is on track to be oversubscribed with Bitcoin Group having already reached its minimum capital raising target.”
— – Bitcoin Group

Managed by AFS Capital Securities, the IPO offers retail and institutional investors a 60.7% share of the company with 8.6% and 30.7% retained by the co-founders and existing shareholders, respectively.

The approval follows a rocky start, with two previous interim stop orders from ASIC in less than a month. The first stop order came in February, a second followed shortly after. Bitcoin Group had reportedly been prematurely soliciting expressions of interest on social media.

ASIC Commissioner, John Price, stated that the company’s actions “may influence the investment decisions of consumers who will not have the benefit of all material information that would be included in a prospectus.”

Bitcoin Group has now successfully completed the prospectus, which shows that the company generates revenue from holding and transacting bitcoins acquired through its mining activities, derived from the operations of the Australian registered company, Bitcoin Mining Pty Ltd (BCM), which it acquired in February.

“Falling electricity costs, state-of-the-art mining equipment and expanding revenue are combining to create a positive [net profit after tax], which acts as a solid foundation for the Bitcoin Group in the lead up to the company’s public offer.”
— – Bitcoin Group

BCM is now the designated mining arm of Bitcoin Group, and conducts mining operations in China and Iceland, with a pilot operation in Australia. The five sites in China account for over 98.5% of the company’s mining operations, the Australia site consists of only one Mining Machine for display and testing purposes.

The Bitcoin network now processes an average of 100,000 Bitcoin transactions per day, rewarding miners approximately 108,000 bitcoins every month. As of Sept 8, 14.59 million bitcoins have been mined, and the Bitcoin Network generally releases 25 newly minted bitcoins every 10 minutes.

“Bitcoin Group generates revenue by providing computer processing activities (Hash Power) for bitcoin generation and transaction processing services to a pool operator that aggregates Bitcoin group’s Hash Power with other providers and provides this Hash Power to the public ledger system known as the Bitcoin Blockchain … Bitcoin Group receives consideration for providing such Bitcoin mining activities in the form of Bitcoins, less a 2.5% commission.”
— – Bitcoin Group

According to the IPO prospectus, the company has purchased 3,579 units of mining equipment including Ant Miner S5, S2, ASIC Miner Prisma and Dragon Miner equipment, but according to its website has a portfolio of 6,129 specialized mining machines, which amounts to 6.1 to 6.3 petahashes of mining equipment.

Today the company is responsible for approximately 1.57% of the global mining hashrate distribution, mines approximately 62 bitcoins per day, and turned a gross profit of UA$431,000 in the first six months of 2015.

If the IPO is successful, the company has ambitious plans to substantially scale up its mining operation, raising the total number of units to just over 54,406 units by March 2016.

Bitcoin Group then expects to provide approximately 13.4% of the world’s Bitcoin hashrate. If this market share is reached, the company predicts a production level of 374 to 551 bitcoins per day.

With this IPO, Bitcoin Group aims to become the “leading Bitcoin industry mining vehicle that is legitimate, accountable and in line with its vision to make Bitcoin mining available to all investors,” according to CEO Samual Lee.

“This is good for investors who, ultimately, will be better placed to make informed decisions about the role and merits of a company like Bitcoin Group. As an industry leader and soon-to-be share market pioneer, we play a critical role in continuing to educate the market while providing investors access to an exciting, high-growth industry sector through a profitable investment vehicle.”
— – Samual Lee, Bitcoin Group CEO

If the IPO is successful, the company could start a trend in the Bitcoin industry. “The public offer will mark a significant milestone for our company and for the broader industry because it will help to advance recent regulatory initiatives by the Federal Government aimed at bringing clarity and accountability around the benefits of bitcoin to Australian consumers and businesses,” states Lee.

Although Bitcoin Group will be the first major IPO in its industry sector, it is not the first cryptocurrency company listed on the ASX. Bitcoin firm digitalBTC has been trading on Australia’s preeminent exchange since June 2014.

DigitalBTC listed on the ASX In June 2014, after Macro Energy acquired the company’s parent, Digital CC, as part of a $9.1m capital raising. The reverse takeover has seen Macro renamed digitalBTC. The company’s Founder, Zhenya Tsvetnenko, said digitalBTC could have listed on the ASX through an IPO, but he was interested in partnering with Navitas chief executive Rod Jones and Mirabela Nickel chairman Craig Burton, who were key backers of Macro Energy.

DigitalBTC’s core cash generator at the time of the listing was Bitcoin mining, but it has since moved to providing software solutions in the remittance and digital currencies sector.