IPO Bitmain: the misleading giant investors of the unicorn mining?

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

mining market and is also responsible for a substantial part of the computing power of Bitcoin through its mega- mining pool Antpool and BTC.com.

Related: Bitmain holds nearly 6% of liquidity in bitcoin, charge of manipulation of prices by IPO

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.

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.

Mining Edge Gone?

Related Article: Bitcoin Hash Rate Rapidly Growing Despite Price

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.

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.

Bitcoin.com, the two tanks mining of Bitmain currently represent only about 15% of the hash rate of BTC, compared to about 40% at the end of February.

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

Commitment to transparency: The author of this article is invested and / or has an interest in one or more well s discussed in this post . CryptoSlate does not endorse any projects or resources that could be mentioned or linked in this article. Please take this into account when evaluating the contents of this article.

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