The company will begin trading on the senior Canadian exchange on Tuesday; it is the first crypto company to be listed on the TSX.
Andrew Kiguel, CEO of Hut 8 Mining (TSXV:HUT), spoke with the Investing News Network (INN) about how the firm is set to become the first cryptocurrency company listed on the Toronto Stock Exchange (TSX) on Tuesday (October 8).
Hut 8 is a cryptocurrency company with positive net income figures and a share price gain of over 40 percent year-to-date, two features that are rare within the publicly listed blockchain space this year.
With the company’s official listing on the TSX slated for Tuesday, Kiguel told INN how Hut 8’s fundamentals helped the company qualify through the newly minted TSX Sandbox Program. Kiguel also discussed the implications of moving to a senior exchange and how that will impact both the company’s liquidity and financing opportunities.
Continue reading to learn more about what Kiguel had to say. This interview has been edited for clarity and brevity.
INN: Hut 8 is the first cryptocurrency company to be listed on the TSX. Can you tell me more about this process?
AK: Being a cryptocurrency company in a newer industry, most of the companies that have come out have been listed on the OTC boards or junior exchanges.
It was important for us to move up to the senior board to establish us as a real and legitimate player in the space. We have strong earnings and we have a lot of revenue. And it enables a whole bunch of other things. The TSX is the fourth largest exchange in North America and one of the largest in the world, and it allows us to be included into different indices.
A lot of investors out there have prohibitions against investing in junior exchanges, but they are allowed to invest in senior exchanges. With that comes more continuous disclosure from us. For example, the timing to file your financials is tighter and the rules around transparency are stronger. While we are already meeting most of those, it’s now going to be indoctrinated as part of that listing.
I think it’s a big deal; we are the first ones to graduate. The TSX put together something called the TSX Sandbox Program. The TSX Sandbox Program was created to help companies that merit a listing but don’t fit the traditional criteria. For us it was perfect, coming from somewhat of a nascent industry. We met 95 percent of the criteria to be listed and the TSX Sandox Program allowed us to get some leeway around things that were, I’d say, less important to our caliber as a company, and get listed.
INN: What are some examples of these requirements that you didn’t meet?
AK: There were two key criteria. One of them was that they wanted us to appoint a corporate secretary. The common practice for a lot of smaller companies is that the chief financial officer will also act as the corporate secretary. It just means when we hold our board meetings, we make sure that there’s someone taking proper notes and making sure that those are filed.
The other criteria that we didn’t meet was having filed a prospectus. Because the fundraising done by Hut 8 in the past was done via private placement, the Ontario Securities Commission still is investigating and looking at how to issue prospectuses for cryptocurrency companies. So we just haven’t had a need to file one, and they’re quite expensive to file. And that was the other piece that we were missing.
You can see that it had nothing to do with the caliber of the company or the revenues or the trading, it was more of a, “Hey we want you to upgrade your internal controls via the corporate secretary,” and “Okay you haven’t filed a prospectus, so we will overlook you having done doing that as part of the TSX Sandbox Program.”
INN: Why do you think there are so few crypto companies being publicly listed right now?
AK: There’s still a few in Canada. I think what happened is in 2017 and early 2018, it was a sector that was very popular. When we did our first private placement for about C$40 million, we had over C$1 billion in demand. That was in late 2017.
Once the price of bitcoin and all the alternative currencies collapsed in 2018, the interest level declined with it. So there wasn’t a lot of new companies that were listed, and I think profitability for a lot of the companies fell. I think Hut 8 managed the crypto winter extremely well. We managed to cut costs, we managed to do a lot of things right. And in our last quarter, we reduced production costs. We have just under C$34 million in net income for the quarter. You don’t see companies in this space with positive net income. We might have been the first company in the world in blockchain to publish positive net income as a public company.
I think that’s one of the reasons why we maybe qualified ahead of other companies. I think we’re the largest by market cap in this space; we’re the largest by size of operations of all the public companies in the space. I think that’s one of the reasons why we differentiate ourselves and were able to qualify through the TSX Sandbox Program.
INN: With the broader access to new shareholders being the major implication moving into this new exchange, what are you most looking forward to looking into the future?
AK: I think it’s liquidity, number one. The word I like it to use is it broadens our audience of investors. So whereas the audience for people that are able to invest into a TSX Venture company is significantly smaller, being listed on one of the largest exchanges in the world all of a sudden makes the ability for global investors to come in. If there’s technology indices, we can be added to that. I think it helps us potentially in the future attract new capital. So if we were looking to raise funds in the future, I think (we would have) broader access and provide (investors) with more liquidity via the senior exchange.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.