Tech 24 July 2018Erik Gibbs
Bitmain receives another nine-figure fund injection prior to IPO
Despite the slowdown in the manufacturing of cryptocurrency mining equipment, Chinese mining company Bitmain is forging ahead with its aggressive operations. The company has announced that it has plans to launch an initial public offering (IPO) soon and recently completed a Series B funding round that was led by Sequoia Capital, receiving over $300 million in the process. Not done with its pre-IPO fundraising efforts, Bitmain has reportedly now received another injection of cash, this one for about $1 billion.
According to the Chinese language news outlet Touchweb, the new funding will be complete by the end of this month. It is expected to increase Bitmain’s valuation to $15 billion prior to the company’s IPO on the Hong Kong Stock Exchange (HKSE), tentatively scheduled for later this year. Bitmain has indicated that it plans on submit the IPO application sometime next month.
Bitmain is the world’s largest cryptocurrency mining hardware manufacturer. It currently controls the majority of the market and has a market share that is three to five times higher than Canaan, its closest competitor. The company is behind almost 50% of all BTC mining pools and will more than likely see its ASIC (application-specific integrated circuit) dominance continue following the recent funding round.
Bitmain founder Jihan Wu has reported that the company’s revenue reached $2.5 billion—eight times more than what it saw the year prior. Net profit for Bitmain last year—$3 billion—was 15 times higher than 2016 profit and the company’s first-quarter profits this year was close to what it was for the entire year in 2017. Bitmain operates on a gross margin that hovers around the 60% mark.
The 32-year-old Wu is leaning toward the HKSE for the IPO, but has said he is also considering “an overseas market with U.S. dollar-denominated shares.” Through the latter options, early investors would have an easier opportunity to cash out.
Wu has indicated that the IPO would be a “landmark” for both the company and the cryptocurrency space. He has said that crypto developers, miners and venture capitalists have been working hard to keep regulators happy, and are switching toward more transparency and less privacy in order to shore up confidence in the crypto ecosystem.
While Bitmain’s financial success may be attractive for possible IPO investors, some industry analysts aren’t convinced that it’s the right move. Mizuho Securities Asia’s Kevin Wang has been critical, stating that investors will only be attracted to the offering because there aren’t many options in the mining space. “They’ll have a premium for their valuation because there are very few stocks like Bitmain in Hong Kong. It’s the sustainability of the business that’s the real question mark,” he said.
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