Is the Bitcoin Group Limited IPO a guaranteed multi-bagger?

Investor interest in alternative financial businesses has skyrocketed in the past few years, as developments such as Peer-to-Peer lending and Bitcoins have grabbed headlines across the globe.

Directmoney Ltd (ASX: DM1) listed on the ASX back in July, Trade Me Group Ltd (ASX: TME) bought a big chunk in NZ peer-to-peer lender Harmoney, and Westpac Banking Corp (ASX: WBC) has exposure to the sector through its stake in SocietyOne.

Now, Australia (and the world) is getting its first listed Bitcoin trader, in the form of Bitcoin Group Limited (ASX: BCG), which recently released its prospectus to interested investors. I’ll dig into the meat of the offering further down the page, but here’s a broad outline:

  • 100,000,000 shares to be issued at $0.20 each
  • Afterwards, there will be a total of 164,870,930 shares on issue including existing shares (market cap of ~$32m)
  • Management to own 9.2% of the company, with the public owning 60.7% and remainder owned by significant investors
  • Minimum investment $2,000
  • Offer closes 30 October
  • Purpose of the offer is to fund growth and increase working capital, as well as repay small director loans

So What?

To their credit, Bitcoin Group has presented a comparatively straightforward and easy to understand prospectus, which is necessary given the largely uncharted territory it is asking people to invest in.

In short, the company uses specialised computer processors to ‘mine’ Bitcoins by solving time-consuming and processor-intensive equations. When an equation ‘block’ is solved, the solver (Bitcoin Group) receives a bounty of 25 Bitcoins. This bounty halves – called ‘Block Halving’ – every 210,000 blocks, and is expected to drop to 12.5 Bitcoins around July 2016.

More processing power will result in Bitcoins being earned faster, however, the difficulty of the equation is recalculated every 2,016 blocks, so that the previous 2,016 blocks would have taken exactly two weeks had everyone been mining

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