In a significant corporate development, Brainhole Technology Limited (Stock Code: 2203), a company listed on the Hong Kong Stock Exchange, has officially announced a major strategic initiative to enter the cryptocurrency market. This move represents a thoughtful diversification into digital assets, aligning with broader technological trends and governmental policy directions.
Announcement of Cryptocurrency Acquisition
On November 30, 2022, the Board of Directors of Brainhole Technology approved a plan to acquire cryptocurrencies through open market transactions. The company has authorized the purchase of up to HKD 24.0 million (approximately USD 3.08 million) in digital assets. Under this authorization, the company has already acquired approximately 800.91 units of Ethereum (ETH) for a total consideration of about USD 1.02 million. As of the date of the announcement, the company's cumulative net purchases of cryptocurrency amount to roughly USD 1.02 million.
The consideration for these acquisitions is being paid in cash, based on the prevailing buy and sell prices quoted on public cryptocurrency exchanges. All purchases are funded through the group's internal resources.
The Board has stated that the terms of these acquisitions are fair and reasonable, conducted on normal commercial terms, and in the best interests of the company and its shareholders.
Completion and Settlement Process
Each purchase order is settled upon its completion. The acquired cryptocurrency units are initially held on a reputable cryptocurrency trading platform, appointed by the group and equipped with robust security measures. The company has indicated that the assets will be transferred to cold wallet storage at an appropriate time for enhanced security.
Understanding Cryptocurrency and Blockchain Technology
Cryptocurrency is a form of digital currency that utilizes cryptographic techniques to control the creation of monetary units and blockchain technology to verify the transfer of funds.
A blockchain is a public, timestamped ledger of all transactions. It is shared among all users of a particular blockchain and is used to verify the permanence of transactions and prevent double-spending. The transfer of funds between parties is facilitated through the use of public and private keys, which ensure security.
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Rationale and Benefits Behind the Investment
This strategic decision was heavily influenced by the Hong Kong Government's Policy Declaration on the Development of Virtual Assets, published on October 31, 2022. The declaration expressed the government's recognition of the potential for Distributed Ledger Technology (DLT) and Web 3.0 to shape the future of finance and trade.
Acknowledging the growing global investor attraction to virtual assets and their increasing acceptance in financial innovation, the Hong Kong Government has committed to fostering a sustainable environment for the virtual asset sector. This includes adapting laws and regulatory systems to provide a conducive landscape for growth.
Brainhole Technology aligns with the government's vision and direction for virtual asset development. Leveraging its own strengths in the smart technology field, the group aims to identify diversified opportunities and capture new possibilities presented by blockchain and Web 3.0. The Board's decision to invest primarily in mainstream cryptocurrencies like Ethereum serves as a preparatory step and a starting point for diversifying its investments within the innovation technology sector. The Board believes this investment will maximize shareholder value in the long term and contribute to a more diversified asset portfolio for the group.
Looking forward, the group remains committed to enhancing and diversifying its investment portfolio to create greater value for its shareholders. The Board will actively seek other acquisition targets, including promising growth enterprises with advanced technology. Furthermore, the group will continuously monitor market and industry trends, seize investment opportunities brought by technological innovation, and proactively consider increasing its investments in innovative technology and Web 3.0-related fields.
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About Brainhole Technology Group
The Brainhole Technology Group is primarily engaged in semiconductor manufacturing and trading, broadband infrastructure construction, and providing integrated solutions for smart field applications. These applications include smart homes, smart campuses, and smart communities.
As the cryptocurrency purchases are conducted on the open market, the identity of the sellers and their principal business activities are not known to the company. The company has confirmed that, to the best of the Directors' knowledge, information, and belief after making all reasonable inquiries, the sellers involved and their ultimate beneficial owners are independent third parties, separate from the company and its connected persons.
Regulatory Implications under Listing Rules
According to Chapter 14 of the Hong Kong Stock Exchange's Listing Rules, this cryptocurrency acquisition constitutes a discloseable transaction for the company. This classification is because one or more of the applicable percentage ratios, as defined in the Listing Rules, exceed 5% but are all less than 25%. Consequently, the transaction is subject to specific announcement and reporting requirements.
Shareholders and potential investors should note that any cryptocurrency purchases under this plan are subject to market conditions and are at the discretion of the Board of Directors. The cryptocurrency market is known for its short-term volatility, and prices can fluctuate significantly. Therefore, there can be no guarantee regarding the timing, quantity, type, or price of any cryptocurrencies purchased under this plan. Shareholders and potential investors are advised to exercise caution when dealing in the company's securities.
Frequently Asked Questions
What cryptocurrency did Brainhole Technology purchase?
The company has specifically acquired Ethereum (ETH). Its initial purchase involved about 800.91 units of ETH for a total cost of approximately $1.02 million USD. The approved plan allows for further purchases up to a value of around $3.08 million USD.
Why did Brainhole Technology decide to invest in cryptocurrency?
The decision is a strategic move for diversification, influenced by the Hong Kong government's supportive policy stance on virtual assets and Web 3.0. The Board believes that investing in mainstream cryptocurrencies positions the company to capture future opportunities in blockchain technology and maximizes long-term shareholder value.
How will the company store its purchased cryptocurrencies?
For security, the acquired cryptocurrencies are initially held on a reputable trading platform with strong safety measures. The company has plans to transfer these digital assets to cold wallet storage, which is not connected to the internet, at a later appropriate time for enhanced security.
What are the risks associated with this investment?
The primary risk stems from the inherent volatility of the cryptocurrency market. Prices of digital assets like Ethereum can fluctuate wildly in a short period. The company acknowledges that the timing, amount, and price of future purchases cannot be guaranteed due to these market conditions.
Does this change the company's core business operations?
No, this investment is presented as a diversification of the company's asset portfolio. The group's core businesses remain semiconductor manufacturing, broadband infrastructure, and providing smart field application solutions.
Was this a related-party transaction?
The company has confirmed that all purchases were made on the open market. After reasonable inquiry, the Directors believe the sellers were independent third parties not connected to the company or its associates.