Steven Gleiser - February 4, 2016
Melbourne based Bitcoin Group (BCG) has succeeded in launching an IPO, and could be listed in the Australian Stock Exchange (ASX) as soon as Tuesday, February 9th. The company, which was looking for about $14 million USD, got only a little above $4 million USD. Still, the company’s CEO announced that the IPO was a success and that the capital raised will serve to see the company’s goal of investment in ASIC miners through. The IPO could be seen as a colossal failure in terms of the money raised given the target, but a more balanced analysis is needed.
The context within which the whole idea of Bitcoin has been working, does not have a strong enough regulatory basis yet. This is probably one of the reasons why investors might have been taken aback by the IPO. Australian authorities have only stated that profit made on bitcoin, the currency, should be declared as capital gains. As far as bitcoin regulation goes, BCG would have probably been better off by launching the IPO in the New York Stock Exchange. This is due to the fact that under CFTC regulation the cryptocurrency will be treated as a commodity, providing a much clearer regulatory framework that has the potential to attract more investment.
Given the fact that BCG’s IPO took place in an environment lacking in bitcoin regulation, a $4 million USD IPO seems to be a partial success at least. BCG managed to convince enough people to buy into its project, and has also managed to set an important precedent. BCG is the first bitcoin company to go for an IPO anywhere in the world. That in itself is quite an achievement, especially given the fact that competition in the world of bitcoin mining is fierce.
Besides the fact that halving bitcoin mining rewards should increase the value of the cryptocurrency and thus may add to BCG’s bottom line, the company has secured its place in history. It could expand its business into other realms as a result of the IPO. Although it would be difficult for the company to grow into one of the main bitcoin mining companies, especially since it controls only about 1.2% of bitcoin mining worldwide, the precedent it set could later develop into a business in and of itself. After having gone through the process of an IPO in uncharted territory, the people involved in the process have unique experience that could help the market their services as consultants for other future bitcoin IPO’s.
However, the biggest winner perhaps, is the ASX itself. By being the first major stock exchange in the world to host a bitcoin IPO, it could become a magnet for future bitcoin IPO’s. Successfully carving out a niche in bitcoin mining and Bitcoin network financing, could help transform the commodity heavy stock exchange into one more open to block chain, finance and even high tech IPOs. To enable this transformation, Australia will have to get its regulators working to provide a positive environment for Bitcoin entrepreneurs.
It is clear that in strict monetary terms, this IPO failed. However this would be a very narrow way of looking at it. It was the first ever bitcoin IPO, which took place in a tough market at a place and time that have proven to be far from ideal. It also took place in a regulatory vacuum of sorts, but it still managed to raise a considerable amount of cash. It is impossible to ignore the great lengths to which BCG went, given its stature as a small company in a niche market, to open the opportunity for all other Bitcoin entrepreneurs out there. Hopefully more will jump into the fray, help cement this achievement, and force governments to provide a better regulatory environment for similar IPOs.