Bitmain Technologies Ltd, the world leader in cryptocurrency mining chips is planning on launching an IPO. The company, which was founded by Micree Zhan and Jihan Wu in 2013, designs and manufactures ASIC chips. ASICs are particularly effective at brute-force number-crunching as is required in crypto mining to verify transactions. Bitmain also operates Antpool, one of the biggest bitcoin mining pools in the industry.
Bitmain is reported to have raked in an estimated 2.5 billion dollars in revenues last year, mostly boosted by the Bitcoin craze. Wu revealed the figures during an interview with Bloomberg in May. Much of Bitmain’s success has been attributed to its near-monopoly of the bitcoin mining business, a situation that goes against the basic principles of decentralization.
It holds an estimated 70 to 80 percent of the ASIC cards and bitcoin mining market. The company also generates significant revenues from mining pool management fees and renting out mining power.
In 2018, however, the company has had to contend with the declining demand for bitcoin miners as cryptocurrency prices hit new lows not witnessed in the past nine months. The increase in mining difficulty, not to mention the spike in mining hardware prices has led to a significant dip in mining profits.
The Bitmain IPO
Bitmain reportedly hit quarterly revenues of $2 billion at the beginning of the year, and is apparently set to become the first blockchain-focused company to achieve $10 billion in annual revenue.
According to a company overview obtained by TechCrunch, it is also looking into an IPO valuation of between $40-50 billion, which is a considerable uptick from its most recent one. Bitmain has yet to formally comment on the issue.
In July, the company was able to raise between $300 million and $400 million from Sequoia Capital, Coatue (a U.S. hedge fund), and Singapore-based, EDBI. It was at the time valued at $12 billion after the Series B round of funding. In September last year, it received $50 million from IDG Capital and Sequoia Capital in a Series A round of funding. This is according to a Caixin report.
Critics Against Bitmain’s Practices
The IPO news has stirred up critics, with some analysts warning investors to be wary. According to Samson Mow, Blockstream’s CSO, Bitmain is about to incur significant losses and has no idea how to maintain BCH, hence the IPO.
This was via a tweet that read, “The Bitmain IPO is incredibly risky for any investor to buy into. The potential for massive losses are just around the corner as they have no idea how to maintain BCH, but are all-in. Play stupid games, win stupid prizes.”
Another tweet cautioning investors cited Bitmain’s investor deck, saying, “According to the Bitmain pre-IPO investor deck, they sold most of their #Bitcoin for #Bcash. At $900/BCH, they’ve bled half a billion in the last 3 months. If Bitcoin Core devs didn’t disclose the Bcash vulnerability, it could’ve wiped a billion dollars off their balance sheets.”
An IPO would enable Bitmain to obtain funding for other ventures, including in artificial intelligence, which it has previously hinted at. This would enable it to have an unyielding advantage over competitors due to market capitalization.
Shrewd Practices
Bitmain has in the past been accused of adjusting the pricing of its miners according to prevailing bitcoin prices. The strategy has apparently allowed the company to weather negative price swings and maintain profitability, according to some cryptocurrency pundits. A Bernstein report on Bitmain also highlights this aspect of its dealings.
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