World's First Bitcoin IPO Sets Stage for More Bitcoin Stocks

The world's first Bitcoin IPO is on track to launch on the Australian Stock Exchange (ASX) in early December, paving the way for more Bitcoin stocks to go public over the next few years.

The company is Melbourne-based Bitcoin Group. Right now Bitcoin Group runs a cryptocurrency arbitrage fund, but plans to expand into Bitcoin mining if the IPO succeeds.

first bitcoin IPOWhile the ASX offering would be the first Bitcoin IPO, it won't be the first Bitcoin stock.

The first Bitcoin stock was DigitalBTC (ASX: DCC), an Australian Bitcoin mining company that started trading in June. In the United States, there's e-commerce platform Bitcoin Shop Inc. (OTCMKTS: BTCS), which trades over the counter. Both are Bitcoin penny stocks.

Neither had an IPO, however. Both DigitalBTC and the Bitcoin Shop got onto exchanges via the "back door." That is, they used reverse takeovers of already-listed companies.

Bitcoin Group will be the first real Bitcoin IPO.

"It's a cleanskin listing," Bitcoin Group Chief Executive Officer Sam Lee told The Sydney Morning Herald. "We're not doing a reverse listing because we only want people who believe in us, instead of having a whole lot of baggage along for the ride."

If the listing succeeds it will mark a major milestone in the progress of Bitcoin as a viable part of the financial universe. It's one more step toward the day when the major players of finance jump aboard the Bitcoin bandwagon and take the digital currency into the mainstream.

"Listing on the main board of the ASX will help legitimize, not only ourselves, but the industry as well," Lee said.

And there's good reason for the world's first Bitcoin IPO to be in Australia...

Why the World's First Bitcoin IPO Is in Australia

Apart from Bitcoin Group being based in Australia, Lee said a major incentive for listing on the ASX rather than in the United States is that the regulatory process for Bitcoin is further along there.

In fact, the first Bitcoin IPO closely coincides with the Nov. 28 close of the Australian Senate's  inquiry for Bitcoin regulatory submissions.

The IPO process at the ASX is unlike a U.S. IPO in that shares are offered for several weeks before trading begins. Bitcoin Group will file its prospectus with the Australian Securities and Investments Commission today (Wednesday). The offer of shares begins Oct. 29.

The company plans to sell 100 million shares at AU$0.20 a share to raise AU$20 million (about $17.6 million).

At the conclusion of the offer period, provided Bitcoin Group remains in compliance with ASX listing rules, the exchange will approve the stock for trading. That's usually a six-week process. So the world's first Bitcoin IPO could be official by early December. The Bitcoin Group stock symbol has not yet been determined.

The offer then will encourage other Bitcoin companies to take the IPO leap. In particular, the race is now on for the first U.S. Bitcoin IPO. There are several promising candidates...

Six Contenders for First U.S. Bitcoin IPO

  • BitFury: CEO Valery Vavilov vowed to be the first Bitcoin IPO, but now may have to settle for first U.S. Bitcoin IPO. In August  BitFury added Varun Gupta, who has experience bringing companies public, to its board. Based in both Amsterdam and San Francisco, BitFury designs and sells the hardware used to "mine," or create new bitcoins. It's a classic pick-and-shovel play. BitFury landed a second round of $20 million in venture capital Oct. 9, bringing its total to $40 million.
  • BitPay: A payment processor based in Atlanta, Bitpay has attracted money from Richard Branson and Yahoo! Inc. (Nasdaq: YHOO) co-founder Jerry Yang. The company makes money by charging fees to enterprise clients. Last year, BitPay said it processed more than $100 million in transactions. BitPay says it now provides payment services for more than 40,000 businesses. The company has attracted a total of $32.51 million in venture funding.
  • CoinBase: This San Francisco-based Bitcoin company is also known as a "universal" because it offers a variety of services, including Bitcoin wallets to consumers and payment processing services to merchants. Last month it expanded its services beyond the U.S. to 13 European countries. Venture capital backers of CoinBase include Marc Andreessen of Andreessen Horowitz. CoinBase has attracted $27.5 million in funding so far.
  • Xapo: Hoping to cash in on the perceived need for increased Bitcoin protection, Palo Alto, Calif.-based Xapo offers wallet services with an emphasis on security. Venture capitalists have put $40 million into the company.
  • Circle: Boston-based Circle Internet Financial popped up on the radar in late March after landing $17 million in venture funding. The company's aim is to "reduce much of the friction and risk that is currently associated with Bitcoin." To do that, Circle converts incoming Bitcoin from customers to fiat currency and stores it. Withdrawals are converted back to Bitcoin only at the time of the request. Circle has attracted $26 million in venture funding to date.
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  • Blockchain: The world's most widely used Bitcoin wallet landed the single-biggest ever venture capital investment - $30.5 million - earlier this month. Blockchain president Peter Smith is hoping to expand into emerging markets, where Bitcoin could help the unbanked. Blockchain's wallet service is free. The company earns most of its revenue via advertising. Though based in the UK, a U.S. IPO is a possibility.

A Bitcoin stock exchange? Overstock CEO Patrick Byrne won over many Bitcoin enthusiasts when his company became the first major retailer to accept Bitcoin. But his latest project would build a new stock exchange on top of Bitcoin technology. He's calling it "Medici," and it could turn Wall Street upside down...

Follow me on Twitter @DavidGZeiler.

About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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