Blockchain Global uses bitcoin to take 40 percent stake in ASX-listed Digital X
Melbourne-based Blockchain Global has made a AU$4.35 million investment in fellow blockchain firm Digital X, paying AU$300,000 of the total by way of a convertible loan in bitcoin.
Of the remaining AU$4.05 million, AU$550,000 will be via convertible notes and AU$3.8 million in shares.
The investment sees Blockchain Global hold a 40 percent stake -- approximately 1.6 million shares -- in the Australian Securities Exchange (ASX)-listed company.
In a letter to Digital X shareholders on Wednesday, the companies explained that Blockchain Global will voluntarily escrow its shareholding for a period of 12 months from the date of issue. Additionally, Blockchain Global will have the right to appoint up two directors to the Digital X board.
Blockchain Global scooped up Digital X's Digital X Direct liquidity desk customers in February, onboarding them onto its own bitcoin exchange platform, ACX.io.
ACX.io was touted at the time by Blockchain Global's CEO Sam Lee as Australia's largest bitcoin exchange by volume and order book, claiming 60 percent of the bitcoin market trade volume in the country.
As part of the deal, Blockchain Global took over the management of Digital X Direct's clients, leaving Digital X to reap 50 percent of the revenue over a five-year term from new customers introduced to the ACX.io exchange as a result.
For the three months ended March 31, 2017, Digital X said it generated revenues of approximately AU$11,000 related to Blockchain Global's referral fees, and AU$2,000 from foreign exchange fees.
The companies originally signed a cooperation agreement back in 2015 that saw the exchanging of industry-specific information.
Blockchain Global was founded in 2014, but was operating previously as Bitcoin Group. It rebranded after the company expanded operations beyond being simply a bitcoin mining operator, now comprising a management consulting division and a corporate incubator -- which ACX.io was born out of.
In January last year, Bitcoin Group closed its initial public offering (IPO) after raising AU$5.9 million to secure its spot as the world's first publicly floated bitcoin mining firm.
However, in March 2016, Bitcoin Group had to scrap its ASX plans after a listing rule prevented the company from adhering to the regulatory requirements.
Digital X became listed on the ASX after performing a reverse takeover of investment firm Macro Energy three years ago. Digital X only emerged in October 2015 after DigitalBTC -- trading as Digital CC -- underwent a name change and shift in business model as well.
After rebranding, Digital X announced its focus would be on its app-based cash remittance product AirPocket, saying at the time that the new name and direction represented a strategic change from a focus on bitcoin as a mechanism in order to store value to a focus on software development.
In April, Digital X entered into a partnership with fellow Perth-based software development firm Lateral Pty Ltd to create blockchain and distributed ledger-based products for large enterprises across Australia and several targeted regions in Asia.
For the first half of the 2017 financial year, Digital X posted an operating loss of $1.06 million, taking a $591,000 hit in the second quarter.
$8.4 million was spent on the purchase of bitcoins for the organisation's liquidity desk, while the hosting of bitcoin mining equipment also set Digital X back $240,000 for the six-month period.