After a 90% plunge in its stock price, BC Technology’s shares doubled in February. Is it a comeback against the wind with the help of the cryptocurrency exchange OSL, or just a speculative play?

BC Technology's shares doubled in February after a significant drop, but is this a genuine recovery or just a speculative move supported by the OSL cryptocurrency exchange?

As one of the two compliant virtual asset exchanges licensed by the Hong Kong Securities and Futures Commission, OSL is pushing up the stock price of BC Technology, which has risen more than 150% since early August. The BC Technology stock price has not been affected by the recent JPEX case that caused a sensation in Hong Kong.

Prior to this, BC Technology had experienced two years of continuous decline, with ups and downs in its stock price as it transitioned from advertising and business park management to digital assets and blockchain businesses.

Industry analysts believe that OSL’s focus may not be on the business itself, but on using the virtual asset license to speculate in the stock market. Earlier, there were reports that BC Technology was looking for buyers for OSL.

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1. Stock price up over 150% in February

On September 29, the last trading day before the National Day holiday, BC Technology’s stock price hit a new high in the past six months, reaching HK$3.77.

Since early August, BC Technology’s stock price has continued to rise, with a cumulative increase of 151%. As of the close on October 4, BC Technology’s stock price has fallen slightly to HK$3.48.

The sharp rise in BC Technology’s stock price is due to the recent progress made by its virtual asset trading platform, OSL.

According to BC Technology’s 2023 interim report, the revenue from its digital asset and blockchain platform business in the first half of the year was HK$105 million, accounting for 83% of the group’s revenue, an increase of 1766.54% compared to HK$5.63 million in the same period last year.

In addition, OSL’s upgrade of its virtual asset license by the Hong Kong Securities and Futures Commission is also a major positive factor.

On August 3, OSL announced that it had been approved by the Hong Kong Securities and Futures Commission to upgrade its existing license and will now provide digital asset trading services for retail investors in mainstream currencies such as Bitcoin and Ethereum. This means that OSL has become one of the only two compliant virtual asset exchanges licensed by the Hong Kong Securities and Futures Commission, giving it a first-mover advantage over other exchanges.

The next day (August 4), BC Technology’s stock price rose 63.25%.

BC Technology CFO Hu Zhenbang told Techub News that retail investors in Hong Kong can now register and trade digital assets, including Bitcoin and Ethereum, on the OSL platform. With the development of the digital asset market and the inclusion of digital asset-related indices for more types of currencies, it is expected that retail investors will be able to trade more and more digital assets.

Since then, although BC Technology’s stock price has fallen back, it has continued to rise significantly as OSL has made multiple advances in the Web3.0 field.

On August 22, BC Technology released its interim performance report, with revenue of HK$126 million, a year-on-year increase of 346%. Among them, the digital asset and blockchain business contributed HK$105 million, compared to HK$5.637 million in the same period last year, an increase of 1766.54%.

On September 11th, OSL announced a strategic partnership with CSOP Asset Management Limited to jointly promote the integration of fintech and the securities industry, and facilitate the transformation and upgrading of securities token products.

On September 21st, OSL established a strategic partnership with the School of Business and Management at the Hong Kong Polytechnic University to establish the Web3.0 Research Center, aiming to promote artificial intelligence and asset tokenization innovation.

Recently, the sensational JPEX case in Hong Kong did not have a negative impact on OSL. The case had limited influence on its stock price, with only a slight decline on the 19th and 20th, followed by a continued rise.

Since September 18th, the JPEX case has caused a sensation in Hong Kong. As of now, the Hong Kong police have arrested 19 individuals involved in the case, and more than 2,000 victims have reported losses totaling over 1.5 billion yuan. According to industry observers, affected by the JPEX case, Hong Kong investors have become more cautious in their investments in virtual assets.

Hu Zhenbang stated to Techub News that Hong Kong has demonstrated its support for the development of a compliant digital asset market in Hong Kong. After the exposure of the JPEX fraud case, there has been a general demand for more stringent regulation of the digital asset market, including the closure of illegal exchanges and over-the-counter trading venues. This has become a positive factor for the development of compliant exchanges in the blockchain technology industry. The JPEX incident highlights the importance for Hong Kong to close legal gray areas and enforce laws to protect investors, which is crucial for Hong Kong to become an international hub for digital asset trading.

“We believe that the government and regulatory authorities will study how to regulate the operations of some overseas non-compliant platforms in Hong Kong, including their marketing activities, fundraising, and payment agents in Hong Kong. As an international financial center and a society governed by the rule of law, Hong Kong will continue to attract more digital asset trading platforms and investors after learning from this lesson. At the same time, we also hope that regulatory authorities can strengthen their supervision and crack down on illegal and irregular activities to protect the rights and interests of investors,” said Hu Zhenbang.

2. The Dawn of Victory vs Speculative Trading

Currently, the main business of BC Technology Group (BC Tech) is engaged in digital asset and blockchain business in Hong Kong and Singapore, as well as commercial property management business in mainland China. From its public information, the former is its most important business.

However, before 2019, BC Tech’s main business was advertising and commercial park management services. In April 2019, BC Tech announced its transformation and changed its name from “Brand China Group Limited” to “BC Technology Group Limited”, seeking to expand its business into rapidly growing digital assets and blockchain technology-related businesses.

From the subsequent stock trends, BC Tech’s transformation was not smooth.

At the time of the name change in 2019, BC Tech was already in a difficult situation, with its stock price dropping from a high of HKD 25 in early 2018 to around HKD 6. After business adjustments and the boost from the bull market in the crypto industry, BC Tech’s stock price rose significantly again, reaching HKD 22.65 in early 2021.

After the second half of 2021, BC Technology experienced a two-year period of decline, with its stock price plummeting to a low of HK$1.5, a decrease of over 90% from its peak.

According to the announcements released by BC Technology, the company has been in a loss-making state for the past two years, with net losses continuously expanding.

According to BC Technology’s 2022 annual report, the company achieved operating revenue of HK$116 million in 2022, a year-on-year decrease of 64%, with a net loss attributable to the parent company of HK$541 million, an increase of 44.02% compared to the previous year. In 2021 and 2020, BC Technology Group had net losses of HK$369 million and HK$291 million, respectively.

In order to reduce operating costs, BC Technology closed its advertising business in October last year and allocated more resources to its OSL digital asset and blockchain platform business.

According to media reports earlier this year, OSL is undergoing layoffs and will reduce about one-third of its total costs. Hugh Madden, CEO of BC Technology, stated that the decision to cut costs was made to respond to the current market conditions, including layoffs.

However, the compliant and stable development path of OSL’s virtual assets and its recent development momentum have given shareholders a glimpse of BC Technology’s turnaround.

On September 22nd, OSL announced that it had successfully completed the Service Organization Control (SOC) 2 Type 2 audit evaluation for its custody and automated trading services (ATS) products. This certification assures institutional, professional, and retail investors that OSL’s core systems are independently audited according to one of the strictest and globally recognized control frameworks.

Hu Zhenbang stated that this certification demonstrates OSL’s new standard in digital asset security and compliance, providing confidence to institutions, professionals, and retail investors.

According to Hu Zhenbang, OSL has been providing professional digital asset services to institutional investors in the Asia-Pacific region, including funds, securities firms, high-net-worth individuals, Web3.0 enterprises, and more. Currently, one of the world’s largest securities firms, Interactive Brokers, and Hong Kong securities firm Victory Securities have partnered with OSL to directly provide virtual asset trading services to their clients with the support of OSL. In the future, OSL will collaborate with more financial institutions to promote digital asset business in Hong Kong.

However, some industry analysts believe that OSL’s focus may not be on the business itself, but on speculating the stock market using Hong Kong’s Web3.0 new policy and virtual asset licenses. OSL’s core is the stock market. As one of the only two compliant virtual asset exchanges in Hong Kong, OSL may be sold at a high price at any time.

Previously, there were media reports that OSL, a subsidiary of BC Technology Group, had decided to exit and was looking for buyers in the market after the 2023 Spring Festival, but so far, no one has taken over.

In response to this, Hu Zhenbang stated that they have been looking for cooperation partners in the business.

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