BitGold Backed By Sprott in Public Stock Market Deal

UPDATE 9th July 0:00 UTC: BitGold has indicated that while it uses blockchain technology, it has pivoted from a focus on bitcoin.

Toronto-based gold and bitcoin startup BitGold has gone public following a reverse merger with mineral exploration company Loma Vista Capital.

BitGold

will retain its name, but halt trading on the Canadian National Stock Exchange as it migrates to the Toronto Stock Exchange. As part of the deal, the company said it will raise C$6m in subscription receipt private placement, with an additional C$5m worth of warrants to be exercised later.

The pending C$6m subscription receipt sale includes commitments from Canaccord Genuity Corp, Clarus Securities, Dundee Securities and GMP Securities. However, perhaps most notably, the lead order on the round was completed by Sprott Inc and its individual directors, the $7bn asset management company formerly helmed by famed portfolio manager Eric Sprott.

Speaking to CoinDesk, CEO Roy Sebag indicated that his primary motivation in taking the unlaunched company public was to build trust with its future customers. Sebag was also the founder and CEO of Loma Vista Capital, which went public in 2013.

Sebag said:

”Why go public? In our case going public is like a quasi-bank license. We have corporate governance standards and an independent auditor, PriceWaterHouseCoopers, auditing or reviewing our financials four times a year under IFRS.”

The news follows the company’s $3.5m Series A round, finalized in December. Participants in that round included PowerOne Capital, PortVesta Holdings, Sandstorm Gold and Soros Brothers Investments, run by Alexander Soros, son of billionaire investor George Soros.

While public, Sebag indicated that the majority of shares are held by the company’s principal investors, himself and fellow co-founder Josh Crumb.

“We’re a public-private company,” Sebag added. “We own 60% of the company Josh and myself, and going public is more of a regulatory framework that will allow the company to establish more trust with its customers.”

Sebag has previously served as the founder and portfolio manager for Essentia Equity, while Crumb was a former senior metals strategist for Goldman Sachs.

Financial commitments

While still open, BitGold indicated that this new round of secured commitments will amount to a larger follow-up to its Series A, totaling C$11m at completion.

Despite the issues faced by other bitcoin companies that have gone public, though, Sebag positioned his platform as one that could expect different results given that it's not a traditional bitcoin company, but rather one that uses blockchains to tap into new efficiencies.

Sebag also stressed that he and Crumb are committed to the company financially as well, and that this should give users and the wider market increased confidence.

“There’s a for-purpose motive in this business,” he said. “Josh and I don’t take salaries, we really believe in this idea.”

Sebag elaborated on his vision for expanding access to gold with the help of blockchain technologies, stating that he intends BitGold to be a tool that allows those with a lower economic status to obtain the benefits of gold ownership.

Platform details scarce

Though it’s emerged as a newsmaker, BitGold remains tight-lipped about its forthcoming product, set to complete its beta launch in two weeks.

However, Sebag remained adamant that, when live, BitGold will improve on existing gold and bitcoin offerings.

“You can drop in a bitcoin and it turns into physical gold, and you can redeem the physical gold to bitcoin,” Sebag said in a more candid moment. “We’re fully compatible with blockchains like bitcoin and ripple, but the platform itself, a lot of it is built around security.”

Still, he rejected comparisons to other gold vendors and blockchain-based gold trading services, adding: "It’s like saying that any company that’s trying to do payments is like a PayPal."

Sebag did, however, suggest how he envisions the BitGold product to compete in the market, positioning it as a security and volatility solution for bitcoin holders, offering the same benefits of cold storage at a lower risk.

BitGold is expected to open to the public between 50 and 60 days after the beta launch.

Gold image via Shutterstock