ASX listing rule forces Bitcoin Group to pull out from IPO

Bitcoin Group has scrapped its long awaited plans to become the world's first publicly floated bitcoin mining firm.

The Melbourne-based company's initial public offer (IPO) closed on January 25, with the company's first day of trading on the Australian Securities Exchange (ASX) originally scheduled for February 2, 2016.

Instead of trading, however, Bitcoin Group is now returning the AU$5.9 million it raised to investors.

"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," Bitcoin said in a letter to investors.

The company's independent accounting firm was required to factor in the reduction of newly minted bitcoins caused by so-called `block halving' in July 2016, without regard to the expected increase in bitcoin price, the letter said. According to Bitcoin Group, the last time block halving occurred in 2012, the bitcoin price soared in the proceeding six months.

The corporate regulator prohibited any forecasting on the bitcoin price, meaning the working capital report was unable to allow for any increase in the cryptocurrency's price once the number of bitcoins available to be mined halved in July, Bitcoin said.

The company said it will consider a new IPO after the bitcoin price responds to the July block halving, which it expects will occur by September.

Confident about his company's upcoming IPO, Bitcoin Group CEO Sam Lee told ZDNet in January he believes bitcoin is a billion dollar industry, rather than a million dollar one.

He said that in order for something to have long term value, it must solve a real world problem. Lee believes bitcoin does just that by making financial transactions at a fraction of the cost of traditional payment systems -- which he said is similar to how the internet made accessing information virtually free for everyone.

Bitcoin Group was about to be Australia's first bitcoin trading company publicly floated, as former bitcoin miners Digital X -- formerly DigitalBTC and Digital CC -- initially found itself listed on the ASX following a reverse takeover of investment firm Macro Energy in June 2014.

Despite Australia's only other bitcoin-concerned business changing direction, Lee said he was positive that Bitcoin Group would succeed on the ASX.

"We've already proven our business model by returning a profit in financial year 2015," he said. "Our expertise and access to the right industry contacts nets us as a highly efficient operation -- I personally envisage 2016 to be no different."

The road to an ASX listing was not a smooth one.

Over a year ago the Australian Securities and Investments Commission (ASIC) warned Bitcoin Group from making public statements concerning its proposed IPO until after it lodged a prospectus. ASIC then placed a stop order on Bitcoin Group in February 2015, prohibiting them from publishing any statements concerning its intention to list publicly in Australia.

This came after Bitcoin Group released a statement at the end of 2014 saying the company planned to list in the upcoming weeks, and said at the time it hoped to become the world's first publicly floated bitcoin trading company.

Bitcoin Group's IPO was initially scheduled for July last year, with ASIC interrupting the listing, again, requiring the company to issue a replacement prospectus. Under that prospectus, the offer was to close on October 30, 2015. A day later, Bitcoin Group issued a supplementary prospectus that identified a cross-reference error; allowed Bitcoin Group to correct statements made in the printed press and electronic media; allowed the company to explain how it would deal with any investment in the IPO coordinated by Bnktothefuture Ltd; and allowed them to give notice of a potential related party investor in the IPO.

The company then issued a second supplementary prospectus on November 20 to extend the offer closing date, in which time Bitcoin Group said it would sufficiently address issues raised by ASIC.

According to Bitcoin Group, ASIC had expressed the view that investors would benefit from the incorporation of an Independent Expert Report to provide an opinion in relation to the variables underpinning the "Bitcoin Mining expression".

They did just that, and a third supplementary prospectus was then issued by the company on December 4.

Last week, Japan's cabinet approved new regulations relating to cryptocurrencies that recognise bitcoin as a legal form of payment which fulfils the functions of currency.

According to Nikkei, Japan currently has no laws on virtual currencies and effectively treats them as objects; and although bank deposits are protected by the Deposit Insurance Act, the country has no rules that require exchanges to set aside funds in case of bankruptcy.

Japan's Finance Minister Taro Aso believes that the minimal rules around protecting consumers still leaves safety concerns, saying that cryptocurrencies have reportedly been used to fund terrorism.

With AAP