Rebuffed: Bitcoin Group chief executive Sam Lee, flanked by associates Jim Chen (left) and Allan Guo (right). Photo: Paul Jeffers
Bitcoin Group has pulled its float after the Australian Securities Exchange said the Bitcoin miner would have to make a fresh offer to investors because it is not convinced the company has enough cash to get through its first year on the market.
But the Bitcoin miner said it will consider a fresh IPO after the so called “Bitcoin halving” due in the middle of this year, which is expected to have a dramatic effect on the Bitcoin price.
The company said on Wednesday it is withdrawing its IPO and will return the $5.9 million it raised to investors, blaming the corporate regulator for not allowing forecasts on the highly volatile Bitcoin price to be used in an assessment of Bitcoin Group’s working capital.
“The key reason for the withdrawal of the offer is due to the requirement of the ASX, that Bitcoin Group procure a working capital report from an independent accounting firm, a report not specifically required for a listing on the ASX,” the bitcoin miner said in a statement.
“In preparing the working capital report Grant Thornton, the independent accountant, was required to factor in the reduction of newly minted bitcoins released on the occurrence of block halving in July 2016, without regard to the expected increase in bitcoin price.
“The last time block halving occurred (28 November 2012), the bitcoin price increased in value by 1032 per cent in the proceeding six months (from US$12.16 to US$125.58). Unfortunately, [the Australian Securities and Investments Commission] prohibited any forecasting on the bitcoin price which resulted in a report which did not allow for any increase in bitcoin price upon the number of bitcoins available to be mined halving in July 2016.”
Bitcoin halving is part of the original rules of Bitcoin and is aimed at reducing inflation in a currency with a finite supply. The next halving is expected to occur around June 2016. It will mean Bitcoin miners will receive half their usual reward for verifying bitcoin transactions. Many argue this will increase the value of Bitcoin itself, however, but this is not certain.
Bitcoin Group – which was to be the second Bitcoin company to list on the ASX and the only one globally to attempt a full IPO – appointed Grant Thornton to assess the company’s finances last month after numerous run-ins with the corporate regulator over disclosures in its original share offer document.
Grant Thornton forecast various scenarios, the “base case” being a $500 Bitcoin price which would see it needing to raise funds again by September 2017.
But the ASX rejected the findings and said if the company wished to continue trying to list it would have to reopen its offer and raise additional funds to “an amount sufficient to deliver it adequate working capital to carry out its stated objectives and to have a sustainable business model.”
The company, which has now delayed its float by more than six times, already had to resubmit its prospectus to the ASX over projections for the stock. It also told the market last month that it had come well short of its raising target of $20 million – with only $5.6 million in funds raised.
Bitcoin Group uses powerful computers to “mine” Bitcoin’s distributed ledger blockchain. This involves cracking complex encryption of the blockchain, which is how bitcoin transactions are verified.
The company gets bitcoins as a reward for doing this, so its future is closely tied to the value of the digital currency.
Additional reporting by Shaun Drummond