DigitalBTC Selloff Prompts Questions from Australian Securities Exchange

Nermin Hajdarbegovic
Jan 19, 2015 at 17:24 UTC
Updated Jan 19, 2015 at 17:29 UTC

Australian bitcoin company Digital CC Limited, which trades as ‘digitalBTC’, experienced a big selloff on the Australian Securities Exchange (ASX) last Friday.

The sudden and drastic increase in trading volume prompted the ASX to send a formal notice to the firm the very same day, asking whether or not there was any undisclosed information that could have prompted the selloff.

The firm started trading on the ASX following a reverse takeover of Digital CC Limited last year.

Following the bitcoin price crash on 14th January,digitalBTC’s trading volume spiked from under 10,000–48,000 shares per day to 416,125 shares last Friday.

Company blames bitcoin slump for spike in volume

In response to the ASX notice, Digital CC secretary Rachel Jelleff said the company was not aware of any information which would explain the recent trading spike, as all relevant information was disclosed to the market already.

Jelleff went on to explain that the low price of bitcoin was the most likely culprit behind the selloff:

“In recent days the bitcoin price has hit a 12 month low of $173, from a price of over $800 in January 2014. The current bitcoin price impacts the profitability of the company’s ongoing bitcoin mining activities and the value of its bitcoin inventory, which is what the company believes is the reason for the recent price movement.”

Jelleff said Digital CC Limited is continuing development of consumer applications and is seeking to fast track the launch of these products in the coming months to become a “vertically integrated payment technology company”.

“These new consumer bitcoin applications will be the focus of the company’s resources and a key driver of its future growth and value,” said Jelleff.

Digital CC stock takes a beating

Shortly after it was listed on the ASX, the company’s share price passed AU$0.30 and six months ago it was relatively stable in the AU$0.32–AU$0.34 range.

However, as the price of bitcoin went down in the second half of 2014, so did Digital CC’s share price and by mid-October it had dropped below the AU$0.20 mark.

digital-cc-share-price

The share price was holding steady near the AU$0.15 mark for several weeks leading up to the selloff, but on 16th January it dropped to a new low. The share price currently stands at AU$0.091. The company has 84.41m outstanding shares and at press time the market capitalisation was AU$7.68m.

Jelleff said the company “has been very fortunate” to be at the forefront of bitcoin mining, which generated nearly $10m in revenue over the last nine months, describing the result as exceptional for a tech startup.

“To maintain profitable operating margins in its mining activities given the recent decrease in the price of bitcoin, the company has been renegotiating power and other operating costs to maintain competitiveness in a lower bitcoin price environment which currently exists,” she said.

Staying competitive in the current climate

Digital CC started exploring alternative energy sources several months ago and, in August 2014, entered a multi-year hosting and power supply contract with an Icelandic company.

The company released its Q3 earnings report in October 2014, In the Q3 report, the company reported an operating loss of $261,000, but also confirmed that it had a substantial bitcoin cache of approximately 8,800 BTC. The Q4 2014 report is due to be published soon.

Since it is currently the only bitcoin mining company listed on a major stock exchange, digital CC offers a rare glimpse into the inner workings of mining operations through its regulatory filings.

Privately owned mining operations tend to be secretive and, with no reporting requirements, such information is usually hard to come by.

Share price image via Shutterstock

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