First Growth Funds is a step closer to a blockchain-related investment with the green light from a leader in the field, Blockchain Global.
In early January the pair announced a conditional placement led by Blockchain Global to raise $3.45 million for First Growth’s (ASX:FGF) expansion into the hot sector.
Blockchain technology, which provides an encrypted, public ledger of transactions, is best known as the basis of cryptocurrencies such as bitcoin. But it has many other potential applications such as enforcing digital contracts, securing public records or regulating online voting.
First Growth and Blockchain Global forged a partnership to identify blockchain-related investment opportunities. On Monday, First Growth announced the successful completion of due diligence, allowing the placement to go ahead.
FGF will issue 282 million shares at 1.22c — 40 per cent of which will be issued to Blockchain Global — with an additional 282 million options exercisable at 3c within 2 years.
Blockchain Global will provide assistance with the establishment and operation of a Blockchain Centre in South Australia by providing an initial licence and one staff member as well as access to a pipeline of deals from its network.
In its current form the deal is still contingent on shareholder approval.
First Growth shares fell 2.8 per cent on Monday to 3.4c — down from their 52-week high of 4c at the announcement of the placement earlier this month.
Blockchain Global is a pure-play blockchain technology commercialisation and investment company founded in 2014. Most recently the company acquired a 40 per cent interest in fellow ASX-listed blockchain company Digital X (ASX:DCC).
Daniel Zhang — chief operating officer of Blockshine, a China communications company specialising in the sector, will be appointed to the First Growth board as a nominee.
The company has scheduled an extraordinary general meeting to vote on the conditions at the end of February.
First Growth Funds first announced a foray into cryptocurrencies and blockchain in November when it established its ICO-N subsidiary. At the time the shares peaked at 2.2c and have since traded as high as 4.3c.
In a January 11 company update, First Growth reported a cash balance of $1.39 million, as well as investment in early stage companies Pearl Global and Cloud Lumen.
“The company anticipates exciting returns on these investments, in particular Cloud Lumen where it will hold approximately 18.5 per cent of the company post-completion of IPO. FGF has also been a long term large shareholder in FYI Resources (ASX:FYI), supporting FYI from a placement in 2016 and currently holding 2.5m ordinary shares,” it said.
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