Bitcoin Group Seeks to Launch World's First Bitcoin IPO

Bitcoin Group has announced it will pursue an initial public offering (IPO) in Australia. If successful, it would be the first bitcoin company to offer its shares to the public in an IPO.

The Melbourne-based firm offers a cryptocurrency arbitrage service, but plans to turn mining into its main revenue source if its offering is approved.

Bitcoin Group's chief executive, Sam Lee, said:

"We believe for bitcoin businesses in the mining industry be taken seriously they need to first have the transparency, accountability and legitimacy of a listed company."

Bitcoin Group aims to raise AU$20m from the sale of 100 million shares at AU$0.20 a share, and would trade on the Australian Securities Exchange (ASX), according to the Sydney Morning Herald.

Emphasis on mining

Notably, Lee also runs Bitcoins Reserve, an offshore cryptocurrency arbitrage fund whose operations will be folded into Bitcoin Group. The fund claims a return of 765% to its clients for the 12 months ended from 24th May, according to its prospectus.

However, if the company raises the expected capital from a share offering, Lee wants to focus the firm's efforts on mining instead.

Bitcoin Group has already engaged with mining rig makers and signed an agreement with an electricity supplier in anticipation of starting its mining business, according to an investor presentation.

Lee says Bitcoin Group will remain "hardware agnostic" although he added that he planned to use some of the proceeds from the listing, if it goes through, to invest in ASIC chip makers.

"Our role is to provide a transparent, accountable and legitimate vehicle for our investors to gain exposure to bitcoin mining, which is currently one of the most profitable segments within the industry," Lee said.

Australia regulatory regime shaping up

Bitcoin Group has announced its listing plans as Australia's regulatory regime for digital currencies begins to take shape. In August, the Australian Tax Office (ATO) published guidance on the tax treatment of digital currencies for the first time.

Under the ATO guidance, digital currencies could be subject to both capital gains and goods and services taxes. This means that buying bitcoin on an Australian exchange, for example, would incur the additional 10% goods and services tax.

While some digital currency companies in Australia welcomed the clarity created by the ATO guidance, many disagreed with the tax treatment. Non-profit advocacy group Bitcoin Association of Australia, for example, said at the time that the treatment placed an "onerous" administrative burden on companies who would be required to keep detailed records of transactions.

Australian exchange and payment processor CoinJar began imposing GST on bitcoin sales from 3rd October, although it has stated that it supports changes to the current tax treatment guidelines.

For Bitcoin Group, the ATO's guidelines are critical to its listing plans. Lee interprets the tax authority's moves, despite the drawbacks in its tax treatment, as largely positive for bitcoin companies there.

"The ATO guidance from our point of view is workable and comprehensive [...] To have a clear position from the ATO is better than not having one at all," he said.

A senate inquiry into digital currency tax treatment and other implications has also been announced, with the findings to be presented next March.

Publicly traded bitcoin companies

While Bitcoin Group would claim the mantle of being the first company dealing in bitcoin to make an IPO, it wouldn't be the only public bitcoin company. Two other firms, digitalBTC and Bitcoin Shop, also have shares traded publicly, although they both achieved this through "backdoor listings".

DigitalBTC is a mining firm that is also listed on the ASX. It raised AU$9.1m in a reverse takeover of a fund that invested in natural resources called Macro Energy in March. Its stock price has risen from under AU$0.05 then to AU$0.20 today.

The firm reported a loss of $11.2m for the year, although it said its bitcoin mining and trading business generated a pre-tax profit of $2.4m. The firm said the net loss was due to an accounting expenditure of $10.9m incurred by the reverse takeover.

Bitcoin Shop is an e-commerce platform that is traded on the OTCQB market in the US. It has run into trouble recently, with its management foregoing salaries in a bid to reduce expenses. Its share price has fallen from $5.26 when it completed its reverse takeover of TouchIT Technologies in February to $0.08 today.

Bitcoin Group's Lee points to digitalBTC's share offering as a sign that the Australian investing public has an appetite for bitcoin stocks. He also believes that a listed entity would give customers the transparency and consumer protections that aren't guaranteed by privately held mining firms.

"Me and other local bitcoiners have been misled by over ambitious delivery dates of certain mining companies in the past, but due to the companies operating as private entities, investors and customers have no recourse to receive fair treatment," he said.

Images via Yasser Alghofily / Flickr; Shutterstock