Bithumb IPO plan facing skepticism

A pedestrian passes by Bithumb headquarters in Seoul in this file photo. / Korea Times file

By Park Jae-hyuk

Bithumb's planned initial public offering (IPO) could face a setback as it has yet to announce details as to how it plans to address some outstanding issues that could prevent it from achieving a successful IPO filing here, mostly related to recent cryptocurrency taxation issues.

Bithumb Korea, the trading platform operator, has begun preparing for a possible stock market launch with Samsung Securities taking an underwriting role, according to report. If Bithumb's IPO actually happens, it would become the country's first cryptocurrency exchange operator listed on the stock market.

Regarding the possibility, the company declined to confirm whether or not reports were true; however, the possible IPO by Bithumb has widely been interpreted as a fact, according to officials.

"It has yet to be ascertained whether the attempt was made deliberately following the settlement of the dispute over the company's management rights or whether it was made suddenly amid the government's move to tax cryptocurrency trading," a stock market expert said on condition of anonymity.

Bithumb Holdings board chairman Lee Jung-hoon recently tightened his grip on the cryptocurrency exchange operator, after Vidente CEO Kim Jae-wook, one of the major shareholders of Bithumb Korea, unloaded his shares.

In addition, the Ministry of Economy and Finance plans to announce the specifics of the country's taxation plans toward cryptocurrency trading in July in line with its move to put the industry under its control. Market officials expect this would help the market set proper valuations of cryptocurrency exchanges here when pursuing IPOs.

Bithumb earlier filed a complaint with the National Tax Service claiming that the imposed $69 million tax bill is "baseless" given that taxation of cryptocurrencies has yet to be legalized in the country.

Cryptocurrency investors welcomed the news that Bithumb seeks to go public, because the IPO will oblige the cryptocurrency exchange operator to disclose the company information transparently.

Stock market experts, however, warned that Bithumb's IPO will take a long time and the company may fail to fulfill the strict requirements to become a listed firm.

Bithumb's governance structure is shrouded in secrecy. According to its regulatory filing, Bithumb Korea's largest shareholder is Bithumb Holdings that had a 74.1 percent stake as of the end of 2019.

Although the largest shareholder of Bithumb Holdings is Vidente holding a 34.2 percent stake, board chairman Lee is considered the "de facto owner," as he is presumed to hold a significant amount of shares in DAA and BTHMB Holdings collectively having a 40.7 percent stake in Bithumb Holdings.

Lee is also being investigated by the police over his alleged violation of the Foreign Exchange Transactions Act. Given that financial authorities strictly review the largest shareholder's eligibility before approving an IPO, the Bithumb listing may end in failure unless the company addresses these pending issues.

Bithumb's previous personal information leakage and its questionable sustainability are cited as additional factors that could cause difficulties for its attempt to go public.

In 2018, Bithumb Korea posted 391.6 billion won ($324 million) in sales and 265.1 billion won in operating profits, and suffered a 205.7 billion won net loss.

Although its sales and operating profits respectively declined to 144.6 billion won and 67.7 billion won in the following year, the company turned a profit, posting 37.2 billion won net income.

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