Bitcoin and Crypto Mining Firms Seek Reverse Business Mergers to Secure IPO Listing Hopes
While the recent bitcoin price slump has affected every aspect of the industry, one particular group has felt the effects of it more than others: mining firms. Many prominent ones such as Bitmain have filed for bankruptcy and are closing down.
Earlier this week, Charles Li Xiaojia, chief executive of the Hong Kong Exchanges and Clearing, was asked about the statuses of the IPO applications of some firms involved in the crypto industry. The firms in question are Bitmain Technologies, Canaan Creative, and Ebang International Holdings. Xiaojia responded by saying that firms who wish to get approval need to show consistency in their business practices.
Bypassing The Process
There is, however, a new way that firms have resorted to as a means of ensuring IPO approval- reverse mergers. A reverse merger refers to a situation where a private company buys a controlling stake in a publicly traded company in order to access IPO- approved status without going through the application process.
On the same day, the Chief Excitive made his comments, Leap Holdings Group, a publicly traded construction firm in Hong Kong, announced that it had sold the controlling stake in its firm to OKC Holdings Corp, the parent company of OKCoin, a Cryptocurrency exchange.
OKC Holdings bought a 60 percent stake in the firm for US$62 million and the deal was completed on January 14, 2019.
This isn’t the first in recent times that this is taking place. In August 2018, Huobi Group purchased a 66 percent stake in Pantronics Holdings, a publicly traded Hong Kong firm.
This method is becoming more and more popular among crypto firms looking to bypass the often lengthy and tiring process of getting IPO approval and it is apparently easier in some places than others.
“Hong Kong is one of the easiest markets for reverse IPOs because there are many small-cap stocks,”
Beijing-based crypto analyst Xiao Le said,
“It did not go well for hardware manufacturers like Bitmain to go public, what more for companies directly dealing with cryptocurrency trades.”
Bitmain, for example, is attempting to buy out a publicly traded firm in the United States and a similar approach was attempted by Mike Novogratz attempted to buy out publicly traded Bradmer Pharmaceuticals in Canada.