Bitcoin Group (ASX:BCG), an Australia-based Bitcoin company slated for IPO next month, has issued a number of corrective statements to investors.
The startup's primary business is the mining of bitcoins. It is scheduled for public listing on the Australian Securities Exchange (ASX) on November 11. It would become the first Bitcoin company to go public through the IPO process. All other publicly traded Bitcoin companies have taken the 'back door' approach by reverse merging with shell entities, typically traded on over-the-counter (OTC) markets or their equivalents, which is generally easier than the IPO.
The road to public investment for Bitcoin Group, however, has been a bumpy one. The company had aimed to go public roughly one year ago, but encountered several delays. This year, the Australian Securities and Investments Commission (ASIC) had placed stop orders on earlier IPO requests for September 2 and October 2. The exact reasons for the stop orders are unclear; such orders are issued to ensure investors are well-informed.
Today, Bitcoin Group CEO Sam Lee issued three corrective statements. Apparently, the ASIC has found a few more points of difficulty before the shares can be offered; Lee said that the clarifications are being issued "following engagement with ASIC."
The first issue pertained to revenue projections stated in the media, specifically the Sydney Morning Herald (SMH). Lee claims that the projections "had no reasonable basis to be made," and as such, he "urges any person who read the articles to disregard revenue forecasts."
He does not explicitly challenge the accuracy of numbers reported. In a prospectus obtained from the company's website on September 8, the company projects that it will mine between 80,000 and 115,000 bitcoins during FY2016. The projection is made in a section titled "Potential revenue generation from proposed Bitcoin Mining." However, no actual revenue forecasts are made in this section. Instead, readers are referred to this section from another part of the document, which states "See section 4.14 to view projected revenue of the 2016 Financial Year in each where Bitcoin is valued at AU$250, AU$400, AU$550."
This information, when combined, implies a projected revenue range of A$20 million to A$63.3 million. Similar though slightly differing figures were reported in various media.
A source at SMH told Finance Magnates that a draft prospectus, which wasn't released to the public, contained actual dollar-denominated revenue projections resembling the above figures.
WeChat Article
Lee further clarified that an October 2 article posted on WeChat, a Chinese social networking forum, contained statements "for which there was no reasonable basis."
The article, titled “Is Bitcoin Mining really profitable?”, contained "potentially misleading statements" of the company's profitability and which were based "on a draft Prospectus not lodged with ASIC or available to the public."
The claim is somewhat reminiscent of the ongoing fight between Saskatchewan-based Dominion Bitcoin Mining Company and the local financial regulator. The FCAA charges that the company unlawfully marketed securities to investors, while the company says that such information was only contained in a draft website not accessible to the public.
Lee said that the up-to-date profit and cost figures are contained in the Replacement Prospectus, which he says was also referred to in the WeChat posting.
The October 2 article also referred to auditing costs, although the accounts in the Replacement Prospectus are not audited accounts.
Lee says that Bitcoin Group retracts all statements concerning costs, profitability and auditing made in the post.
Bitcoin Group received a warning from ASIC earlier this year after trying to woo investors on WeChat prior to it becoming an Australian company or filing a prospectus.
Investment By the Australian Prime Minister
Another WeChat article, published on October 7, discussed the involvement of Australian Prime Minister Malcolm Turnbull in bidding for the company's shares. Lee says that Bitcoin Group "retracts any suggestion that Mr Turnbull personally invested in the Bitcoin Group IPO."
Turnbull was in fact using a newly launched app of "On-Market Bookbuild [sic] (an online platform which allows retail investors to make live bids for companies raising equity)", for demonstration purposes, to bid for Bitcoin Group shares on behalf of Ben Bucknell, the CEO of On-Market BookBuilds.
Investors interested in digital currency may be more wary of claims of blessings by government officials these days. Recently, the former mayor of Arcadia, California resigned from his position of councilman amid allegations that he promoted the GemCoin Ponzi scam.
Investors Advised
Lee goes on to state that the corrective statements were made to ensure that investors do not invest in shares based on information not contained in the Replacement Prospectus.
As such, the deadline for investors to withdraw their subscription for a refund has been extended from October 30 to November 13, two days after the scheduled date for listing on ASX.
This Friday, October 23, the company says it proposes to lodge a Supplementary Prospectus that would extend the IPO's closing date until November 13.
The Replacement Prospectus can be found here. The sections dealing with revenue projections are unchanged from the document appearing on the company's website on September 8, which can be found here.
IPO's are on our minds today, the latest high-profile offering coming from Ferrari N.V. (NYSE:RACE). Investing in bitcoin mining returns can be a lucrative enterprise if the bitcoin price performs well, but can be disastrous if otherwise.
Bitcoin Group is bullish on the bitcoin price, arguing that it will appreciate with "the increasing Bitcoin Network’s value." However, it warns that prices can be volatile and difficult to model, and that there is a risk of decline.
