Melbourne-based bitcoin mining startup Bitcoin Group has received approval from the Australian Securities and Investment Commission (ASIC) to go ahead with its proposed $20 million listing on the Australian Securities Exchange.
It’s been quite the saga for Bitcoin Group, which first signalled its intention to list late last year, and was the subject of two ASIC stop orders after lodging its first prospectus in June.
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The listing is scheduled for November 11 and the startup says it’s already reached its minimum capital raising target, and is on track to being oversubscribed.
The IPO will offer retail and institutional investors a 60.7% share of the company, with the co-founders retaining 8.6% and existing shareholders 30.7%. Bitcoin Group has already raised $1.6 million in pre-IPO money.
Bitcoin miners use powerful computer hardware to complete complicated mathematical calculations for the digital currency’s network to confirm transactions. In exchange they receive newly created bitcoins.
Bitcoin Group turned a gross profit of $431,000 for financial year 2015. It has bitcoin mining equipment based on sites in China, Iceland, and a solitary machine in Australia. Roughly 90% of the money raised from the IPO will go towards expanding these mining operations. It currently controls 1.7% of the total bitcoin network mining pool.
For bitcoin mining operations access to cheap power is key and the reason why Bitcoin Group’s mining equipment is based overseas. The startup invests the vast majority of the bitcoins it mines, back into mining equipment, co-founder Sam Lee explained at a Bitcoin Melbourne Meetup recently.
“In terms of how much bitcoins we have, we don’t actually have that much because we reinvest it into machines,” Lee said.
“Because after a year, one bitcoin will still be one bitcoin. If you invest one bitcoin into bitcoin mining, we believe that will be it’s going to become three bitcoins in a year’s time,” he says.
Cheap power also insulates the startup from the risk of a bitcoin price crash, Lee says.
This is important even given the stability of the bitcoin price this year, relative to its turbulent history. It opened the year at $US314 and is currently trading at $US243.
He says when the bitcoin price drops, so too does the difficulty of mining.
“The price drops, then the difficulty drops and you mine more. Our competitors stop, but we have access to the cheapest electricity,” Lee says.
“When competitors stop, it means the hash rate (processing power of the bitcoin network) drops, and we mine more bitcoins. So even though the price is $100, we’re mining twice as many bitcoins. So it’s a self-balancing system.”
Lee says Bitcoin Group’s IPO will bring greater legitimacy to the 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,” he says.
“This is good for investors who, ultimately, will be better place to make informed decisions about the role and merits of a company like Bitcoin Group.”
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