Business 25 January 2019

Jasmine Solana

HK stock exchange chief takes a swipe at Bitmain’s IPO attempt

Having a “sustainable” business model is one of the key requirements for companies attempting to list on any bourse, such as the Hong Kong Stock Exchange (SEHK). It’s also one of the things that cryptocurrency mining giants, Bitmain for instance, lack, hence the stock exchange’s supposed reluctance to give its approval.

On Wednesday, SEHK CEO Charles Li Xiaojia responded to media questions on the sidelines of the World Economic Forum in Davos about the status of initial public offering (IPO) applications of three cryptocurrency mining hardware manufacturers—Bitmain Technology, Canaan Creative, and Ebang International Holdings.

Li didn’t specifically mention the three firms, opting instead to discuss the stock exchange’s general requirements for listing. Simply put, it’s all about the company’s business model.

“If a company made billions of U.S. dollars through Business A, but suddenly said it will do Business B without showing any performance, or said Business B is better, then I don’t think the Business A featured in their application will be sustainable,” Li was quoted as saying by Tencent’s news portal Finance.QQ. “Besides, if regulators were hands off [on Business A] in the past but will regulate it in the future, will you be able to continue the business and still make money from it?”

SEHK’s chief executive said all IPO candidates have the right to appeal, noting that the stock exchange will ensure “procedural justice.”

For Chun Yin Cheung, a partner in PwC China’s risk assurance practice, Li’s comments were almost a swipe at crypto mining companies. Chun told the South China Morning Post: “Investors share some concerns. For one thing, it remains a question if the cryptocurrency mining business still makes that much money. Secondly, the cryptocurrency bear market has largely weighed on the valuation of these candidates. Some own a considerable number of tokens.”

The three crypto mining companies filed their IPO applications with the SEHK last year: Canaan got a head start in May, followed by Ebang in June, while Bitmain lodged its bid in September.

In December, reports surfaced that the SEHK was “reluctant” to give its approval “because the industry is so volatile,” and that “there’s a real risk that they could just not exist anymore in a year or two.”

Bitmain has been shutting down several of its operations—mostly overseas—as it focuses on “things that are core to our mission and not things that are auxiliary.” Bitmain has reportedly closed its offices in Israel, Texas, Amsterdam, and more recently its Wormhole team. The news followed reports of an executive shakeup, with Bitmain CEOs Jihan Wu and Micree Zhan replaced by Haichao Wang, the firm’s product engineering director.

Ebang has since refiled its draft IPO prospectus in December, in which it noted “significant decreases” in revenue and gross profit during the third quarter of 2018. Canaan’s listing application, on the other hand, has already lapsed in November. The Hangzhou-based company is reportedly considering an IPO in the United States “as soon as the first half” of 2019.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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