Global Bitcoin IPOs fall short of targets

Fundraising for a global initial public offering of a company that mines bitcoin has reached A$5.9 million ($4.2 million), a far cry from its expected A$20 million target.

The Melbourne, Australia-based bitcoin group announced on Tuesday that it had raised A$5,927,168.4 on the Australian Securities Exchange’s book run.

Although the fundraising was less than a third of the planned amount, Bitcoin Group CEO Sam Lee said it was a "solid step forward."

"That's more than enough for the company to execute on currently expanding our footprint by acquiring new development equipment," he told CNBC on Tuesday.

Bitcoin is an electronic currency that allows users to exchange online points for food and services. Because there is no central bank, Bitcoins are issued online through a process called "mining". This process is carried out through a decentralized network of computers, which compare and match transactions with the amount of currency in circulation. Whether the computer calculation is correct or not, it can claim transaction fees from the newly issued Bitcoins.

Bitcoin Group was founded in September 2014, the first time management formed a publicly listed entity. Lee’s background is in financial services and electronic media.

There are many concerns about Bitcoin: It is known for its volatility and has recently come under heavy criticism for facilitating illegal activity, given its ability to be used anonymously. It faces intense competition and uncertainty in the industry over the currency's regulatory and legal treatment.

"As an investor, I would think twice before investing in a company developing bitcoin," Nicholas DeBoer, a venture capitalist at London-based Badelton Capital, told CNBC on Tuesday.

He later added: “In general, in the bitcoin industry, we’ve seen a lot of venture capitalists invest over the last three years, but we haven’t seen the money show up.”

Bitcoin Group produces about 1.2% of the world's bitcoin production from six development sites in China and Iceland. The vast majority of operations are in China because, like the Nordic countries, electricity is cheap. However, this lack of diversity makes the country's position on bitcoin vulnerable to regulatory changes.

If the company raises the expected A$20 million, it plans to use A$18 million to invest in development equipment and A$2 million for general corporate purposes, including listing costs.

“There are still a lot of people who believe in the long term of Bitcoin, both as an asset and just the technology… but there is definitely a long-term outlook,” DeBoer told CNBC.

JPM compiled from

CNBC, World`s First Bitcoin Mining IPO Falls Short, by Katy Barnato.