This week, Hut 8 Mining Corp., a cryptocurrency mining and blockchain infrastructure company headquartered in Toronto, announced it would begin trading on the Toronto Stock Exchange (TSX) on October 8.
In addition to expediting new listings and transactions, the Sandbox could also become a channel for new securities policy development.
The company is the first blockchain or cryptocurrency company to be listed on the TSX, and is also the first to be listed via the TSX Sandbox. The program aims to accept more listing applications and transactions, and grant access to newer companies that don’t meet all the traditional requirements to be listed, such as market capitalization, a long-form prospectus, management team’s experience level, incorporation in Canada, or corporate governance practices.
“Our move to the TSX, the senior public market of the TMX Group, is another significant step in our evolution to provide improved liquidity and enhanced public disclosure to investors,” Andrew Kiguel, CEO of Hut 8, said when the company first announced it would list last month. “We are grateful to the TSX for conditionally approving Hut 8 to be the first company through the TSX Sandbox.”
The TSX said Sandbox will be a laboratory of sorts for new policies that would normally require longer consideration periods before being executed. A blog post from law firm Bennett Jones suggested the TSX Sandbox could also become a channel for securities policy development, as well as an expeditor of new listings and changes in capital structure, for issuers.
While in the TSX Sandbox program, Hut 8’s common shares will trade in the same way as other TSX-listed companies. Under the terms of the agreement, Hut 8 said it will exit the TSX Sandbox program upon the receipt of a prospectus, and no significant compliance issues for a 12-month period. If there are any significant compliance issues, the 12-month period will reset, Hut 8 said.
The TSX Sandbox does not have a designated list of eligibility factors or conditions in order to list, as the conditions are modified to fit each individual applicant, and are available for any existing or potential issuer. Hut 8 had previously been trading on the TSX Venture Exchange, an exchange for smaller companies, that is still owned by TMX Group.
Companies interested in Sandbox can request a pre-filing meeting before applying to the TSX Sandbox. Applications must consist of the same documents as those of a regular application, but should also add a submission requesting the application be reviewed by the TSX Sandbox. Applicants from all sectors and stages are eligible to apply to the TSX Sandbox.
Hut 8 has raised $140 million through private placements and debt, which do not require a public prospectus. Kiguel told BetaKit Sandbox allowed the company to “bypass” the requirement of a prospectus, which he said can be expensive and runs the risk of being declined by a provincial securities regulator like the Ontario Securities Commission (OSC).
The TSX Sandbox does not have prescribed eligibility requirements to list, as they are modified to each applicant.
“This would have resulted in substantial cash wasted,” Kiguel said. “While I’m not a lawyer, private placements require that investors meet certain accredited investors’ criteria before investing for investor safety. Thus, Hut 8’s private placements were only open to sophisticated investors and institutions. If we had filed and cleared a prospectus, anyone would be able to buy. That is more risky in my opinion for a startup.”
A spokesperson from the TSX told BetaKit the OSC is aware of and regulates the business of the exchange, but has no day-to-day involvement in the operations of Sandbox.
Kiguel said a private placement is quicker, less expensive, and targeted at sophisticated investors, which is a better mechanism for earlier-stage companies. He said shares offered through a prospectus are better for larger, more established companies seeking to raise large amounts of capital because they are available for purchase by anyone.
Founded in 2017, Hut 8 owns and operates two sites in Alberta that use 94 containerized data centers for bitcoin mining through BlockBox AC. The company aims to be a low-cost producer of bitcoin and maintain an inventory of bitcoin for appreciation. In a recent interview with Forbes, Kiguel said most of Hut 8’s competitors are private and inaccessible to investors, and the public competitors do not hold an inventory of bitcoin, meaning they do not provide long-term exposure to bitcoin.
Hut 8’s stock ticker will be listed as “HUT.” The company hopes to provide investors with direct exposure to bitcoin, without the technical complexity or constraints of purchasing the underlying cryptocurrency, eliminating the need for investors to create online wallets or wire money offshore and replacing it with a more secure and simple way to invest.
“Our goal is to be the largest bitcoin miner on the planet and hold an inventory of bitcoin for appreciation,” Kiguel said to Forbes.