Bithumb is moving quickly, targeting a corporate public offering (IPO) in the second half of this year, including initiating partitioning. However, there are many challenges to be addressed, such as improving transparency in corporate governance and profitability.
According to the Financial Supervisory Service's electronic disclosure system on the 24th, Bithumb submitted a securities registration statement for partitioning on the 21st and announced that it plans to establish a new corporation on July 31. Earlier, Bithumb attempted partitioning last year but postponed the schedule due to a reevaluation of its business strategy. This partitioning is aimed at separating the virtual asset exchange from new business functions to enhance competitiveness in each sector.
◇ Corporate governance controversy needs resolution
Many experts point out that Bithumb needs to clarify its complex corporate governance to succeed in the IPO.
Currently, Bithumb's ownership structure remains unclear. The largest shareholder, Bithumb Holdings, holds 73.56% of Bithumb's equity, with Vidente holding 34.22% as the major shareholder, while companies like DIEA share the remaining equity. Vidente's governance structure continues through Inbiogen, Bucket Studio, and the Initial No. 1 Investment Association, with Initial as the largest shareholder of the Initial No. 1 Investment Association, whose actual owner has not been confirmed. Additionally, the actual owners of the other companies, excluding Vidente, are Jeong-Hoon Lee, the former chair of Bithumb Holdings and Bithumb Korea's board of directors.
Vidente is currently under scrutiny as four former and current employees were indicted for embezzling approximately 51 billion won, leading to a trading suspension and now facing delisting examination. The virtual asset industry is keenly observing whether Vidente will sell its equity as it holds significant influence over Bithumb. The former chair has come under fire regarding qualifications to be a major shareholder due to fraud allegations amounting to over 110 billion won. Although the Supreme Court acquitted him earlier this year, related legal risks still remain.
◇ Single revenue structure from fees
Bithumb's profitability is also in question. The company's revenue last year was 496.3 billion won, a 254.4% increase compared to the previous year. The issue is that over 90% of this revenue comes from commission earnings through virtual asset transactions. However, the virtual asset market has higher price volatility compared to stocks. In fact, most of last year's revenue was generated in the fourth quarter, around the time of the Trump administration.
Advertising costs are also rising sharply. Looking at promotional expenses, they increased from 2.5 billion won in 2022 to 10.3 billion won in 2023, and jumped to 163.7 billion won last year. Advertisement expenses rose from 5.8 billion won in 2022 to 28.5 billion won last year.
The total marketing expenses, combining both items, increased from 16.1 billion won in 2022 to 192.2 billion won last year, a twelve-fold increase. This high expenditure was necessary to boost market share ahead of the IPO. The fact that Bithumb, essentially reliant on commission income, spends nearly 200 billion won on marketing is certainly concerning for investors.
◇ Government on-site inspection extended by a week
Financial authorities are also conducting on-site inspections. The Financial Information Analysis Unit (FIU) under the Financial Services Commission is inspecting domestic won-based virtual asset exchanges for the renewal of virtual asset reporting businesses (VASP) this year, and recently, Bithumb's inspection period was extended by one week. This indicates that there are many matters to look into. Particularly, as Upbit, which operates in the same industry, faced severe sanctions for unreported transactions, Bithumb is also at risk of fines or sanctions.
Bithumb abandoned plans to list on the KOSDAQ market in 2020. If Bithumb succeeds in its IPO this year, it will be the first listing among domestic virtual asset exchanges. There have been rumors that Bithumb was considering a listing on the U.S. Nasdaq market, but it is currently reported to be reviewing a listing on the domestic market. A Bithumb official noted, "The listing is being prepared with the goal of the end of this year, as promised to shareholders and customers during the 10th anniversary celebration in 2023," adding, "By changing the corporate governance system, we aim to ultimately enhance corporate value and shareholder value."