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At the beginning of August 2018, Bitmain Technologies, based in Beijing, announced its plan to become public in Q4 2018 with much excitement and braggart.
The Chinese cryptocurrency company, founded in 2013 by Jihan Wu and Micree Zhan, has long been a powerhouse in the cryptocurrency space. As a chip pioneer ASIC mining Bitmain controls about 70 percent of the
This combination of dominance and diversification in the Bitcoin sector process has helped to become a financial power, with profits in 2017 estimated at $ 3-4 billion, according to Bernstein Research. Bitmain also reported net income of $ 1.1 billion in the first quarter of 2018.
Given its massive profits and news of a $ 1 billion pre-IPO funding, Bitmain's valuation rose to $ 15. billion and its highly anticipated IPO was expected to join the ranks of historic IPO giants like Spotify, Facebook and Alibaba.
Unfortunately, things did not go well from the announcement. Thanks to a combination of self-inflicted misadventures and diligent investigation, it was revealed that Bitmain has three main problems that damage their credibility and the potential of their IPO:
- SoftBank's denial of investing in Bitmain
- Bitmain & # 39; s potentially catastrophic bet on Bitcoin Cash
- The failed development of Antminer 11
While the IPO of Bitmain can still end up being a wild success, its lack of transparency and precarious position deserve second considerations.
SoftBank Out, Tencent Unlikely
News of SoftBank, one of the most successful Japanese companies, and Tencent, the world's largest investment company, part of the $ 1 billion pre-IPO-round was seen initially as a strong confirmation of Bitmain.
However, it appears that an agreement with SoftBank, the largest shareholder in Uber, has never been realized, with Cointelegraph reporting Kenichi Yuasa of the corporate communications office of SoftBank Group Corp stating:
"Neither SoftBank Group Corp. nor the SoftBank Vision fund were in any way involved in the business. "
In addition, it seems that the agreement with Tencent is highly unlikely, with no announcements or confirmation of the deal since its publication in the Chinese QQ, August 4.
Bitmain, understandably, refused to comment on the matter. And not commenting, Bitmain gets the benefits of a potentially profitable voice without having to say a blatant lie. Although this is probably in their best financial interest, this is probably not the best look for a company already seen with distrust after the Bitcoin / Bitcoin Cash fork.
The Wrong Bitcoin
The affinity of Bitmain for Bitcoin Cash (BCH) seems to be a potential weakness and could be the reason for their IPO. According to the popular Twitter threads of Samson Mow, Parabolic Trav and WhalePanda as well as the analysis of Crypto Herpes Cat on Medium, Bitmain has bleeding selling most of its holdings in BTC for BCH. It is estimated that they now hold about 1 million BCHs.
The first column, the amount of BTC from EOY 2016-2017 drops from 70k of coins to 35k of coins. It does not reveal the BTC additions since 2017 because they sold BTC by the end of the year. What this tells me is that they sold the entire inventory mined 2017 + coins 35k 2016 to support the Bcash picket. Rekt https://t.co/ZZasSuwSri
– Parabolic Trav (@parabolictrav) 12 August 2018
Unfortunately, with 56 percent of BCH held in only 67 portfolios, the decline in 39, adoption of merchants and "Less users and owners", Bitmain can not download its BCH without potentially crating its market.
According to Mow, this perfect storm caused Bitmain to lose between $ 600-700 million in the second quarter and that's partly why IPO is a much needed cash boost.
Why is Bitmain raising capital so fast and only showing first-quarter results to pre-IPO investors? Now we are ready for Q3. The reason is that the second quarter was a disaster. Bitmain is sitting on a massive $ 1.24 billion in inventory and S9 prices fell about 85%! Second quarter losses are between $ 600-700 million. pic.twitter.com/fVYcDRTvBp
– Samson Mow (@Excellion) 13 August 2018
Mining Edge Gone?
Despite Bitcoin's 2018 crash, the hash rate continued to grow steadily during the year, creating greater demand for the next generation of powerful and efficient miners.
As the founders of the revolutionary ASIC miners, Bitmain has long been the leader of the industry mining ; however, they seem to be struggling to produce the next generation of Antminers.
It has been reported that the bitmain risk wafer on 16nm / 12nm / 10nm has failed and lost about 4 billion yuan. #btc pic. twitter.com/4K2wzsJsbz
– Red Li (@redtheminer) August 4, 2018
According to Red Li, Bitmain spent nearly $ 600 million (4 billion yuan), trying to develop the Antminer 11 without success. A possible explanation of their difficulty in doing so could be attributed to the fall between Bitmain founder Jihan Wu and former chip designer Yang Zuo Xing. Xing now works for the WhatsMiner competitor.
On top of their difficulties in developing their next miner, Bitmain hash has fallen from about 40% at the end of February to about 15% at the time of writing.
An IPO Worth Watching
While Bitmain clearly has some problems, it should not be taken lightly. Wu has established himself as an expert business man and Bitmain's profits are astronomical for a five-year-old company.
Perhaps this examination is exaggerated, and Bitmain ends up again providing a chip of extraction of a higher level and re-establishing its dominance in the cryptic economy.
On the other hand, if indeed it is blocked by a pile of immovable BCH and a deprecatory inventory of Antminers, Crypto Herpes Cat suggests a possible solution.
"You IPO and pass the stock market into a unique huge supply of securities and hope that investors do not realize that all your current assets are very, very illiquid."
No matter what happens – Given the controversial, but successful Bitmain track record – the IPO and its consequences will be something to keep an eye on.
Cover photo by Jennifer Latuperisa-Andresen on Unsplash
Disclaimer: The opinions of our writers are exclusively their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate approve any projects that may be mentioned or linked in this article. Buying and exchanging cryptocurrencies should be considered a high-risk activity. Please do your due diligence before taking any action related to the contents of this article. Finally, CryptoSlate assumes no responsibility in case of loss of money by trading cryptocurrencies.
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