IPO filed by Bitmain in Hong Kong Stock Exchange– There seem to be many things that are going on in the Hong Kong Stock Exchange recently,  starting with the exits of early executives from Block.one. Now there is another significant development which has taken place. The Bitcoin mining giant Bitmain has just filed an IPO in HKEX( Hong Kong Stock Exchange).

But controversy has its share in this development too. Interestingly, many firms have denied their role in the pre-IPO fundraising which led to doubts about the company.  The IPO prospectus released by the company on a list of long-awaitedh developments conforms to the various news reports. Which suggested that the company had been thinking deeply into going public over the Hong Kong Stock Exchange. That is for a Multi-Billion Dollar Public Fundraising.

Much of the details are kept unpublished about the IPO. Those are a number of shares that are going to be offered or the timetable for the public offering. This is also unclear as to how much will be the company valued. Since the application is still in the draft form. HKEX has not listed any further hearings upon the same.

Prospectus

But the prospectus is not all opaque about information. It has got information about the estimation on the how the Bitmain is structured. Even it contains inner working style and not lastly, the financial standings of the Bitmain itself.

The revenues generated by Bitmain are on the journey towards the uphill, from what the filing reveals. The filing revealed the revenues of the company as $277,612,000 in 2016, $2,517,719,000 in 2017 and $2,845,467,000 as of June 30 this year. This graph of revenue seems promising and is a good sign for investors.

The prospectus was released, after adjusting the costs and other business expenses. Bitmain’s net profits were $48.6 million in 2015, $113.5 million in 2016, $952.5 million in 2017 and $952.1 million in Q2 2018.

Apart from these, the company also reported its holdings in cryptocurrencies. Which accounted for an estimated 28% of its assets so far this year. However, the allocation which was broken to several coins was not revealed. These holdings were valued at $56.3 million and $872.6 million, or 30 percent of assets, by the end of 2016 and 2017, respectively.

Hardware sales of Bitmain take a big upward move

IPO filed by Bitmain in Hong Kong Stock Exchange-Bitmain has been on a remarkable journey over its hardware product sales. The sales are increasing on a  whooping note, year by year. 230,000 miners were sold by Bitmain in 2015, 260,000 miners in 2016, 1.62 million in 2017 and 2.56 million as of early 2018. The customer base that had purchased the miners have paid to Bitmain in cryptocurrencies. As well, as much as 27% of the total payments have been made in cryptocurrencies.

There has been also no limit over the products of Bitmain. For instance, they had all their hardware concentrated towards mining Bitcoin. However, the recent trends shifted from an “only bitcoin” to “ bitcoin and bitcoin cash.”

There seemed to be a downmarket trend for hardware sales. However, Bitmain has denied this and strongly believes in the upward trend of sales for Bitcoin Hardware. They even claim that they have a good number of orders placed with their production partners. This is to meet with the slow hardware sales downmarket trend that led to an oversupply of inventory in early 2018.

Increasing Land Grab of Bitmain

IPO filed by Bitmain in Hong Kong Stock Exchange-Looks like Bitmain has started concentrating on China to set up its mining sites. The filing revealed that over 76,000 square meters of land divided into two parts was purchased in Mongolia. Around 33,000 square meters of land was purchased in Ningxia and the fourth one being in Sichuan over 9,400 square meters.

Bitmain has also been taking the land on lease, which accounts to over 15,000 square meters of the rented area which is distributed around 5 locations.

Also concentrated towards expanding their operations globally, Bitmain has selected some locations in the U.S. states of Washington, Tennessee, and Texas, as well as in the Canadian province of Quebec. One of the reasons behind this Canadian location was the abundant and less costly availability of hydro-electricity to mine cryptocurrencies.

Is the prospectus limited to accounting information?

Interestingly, no. The prospectus has also revealed about the fundings that  Bitmain has received. Which will be covered by Nvest Weekly in the next section of this article. Apart from these, the prospectus also revealed the structure of the organization and dealings at Bitmain. For instance, in early half of 2018, 2,594 employees were working in various divisions of Bitmain, who were then broken down as 840 in research, 535 to mining farm maintenance, 701 in product management,  235 in administration, 209 in customer service and 74 in sales and marketing divisions respectively, according to the sources.

The prospectus also went on to reveal who were the advisor companies for the IPO filing. Some of the names that were stated in the prospectus are China International Capital Corporation, Hong Kong Securities Limited (only sponsor for the offering) and Commerce and Finance Law Offices on the finance side of the public offering. However, the auditing, legal and consulting services are provided by Maples and Calder in Hong Kong, KPMG, and Frost & Sullivan.

 

The prospectus has revelations on the funding

There were three rounds of funding in the case of Bitmain, which came from investors in Asia and the U.S.

In the Series A investment round which was the first round, Bitmain received $18.75 million from SCC Venture, $12.5 million from Richway Investment, $12.5 million from Sinovation, $4.25 million from Blue Lighthouse, $1.2 million from IDG China and $0.80 million from Beijing Integrated Circuit, according to a cap table in the prospectus. The first round closed on August 8, 2017.

The Series B investment round, which was the second, involved investments from SC GGFIII ($49.98 million), China Taijia ($29.99 million), Blue Lighthouse ($25.99 million), Coatue ($17.49 million), EDBI ($13.99 million), Rising Delight Enterprises ($7.99 million), FreeS Bit SPV Fund ($7.99 million), Richway Investment ($4.99 million), Han Guang Capital ($3.99 million) and FBH Partners ($0.99 million). This round was again largely led by SCC Venture, the largest contributor in the Series A round of investment. This time SSC venture funded around $128.95 million. The second round was closed on June 19, 2018.

There is pre-IPO funding round after the Series B investment round. This pre-IPO round ended on August 7, 2018. The investments were from Crimson Partners contributed ($149.09 million), as did Casmain ($43.01 million), CICFH Entertainment Opportunity ($40.01 million), Lioness Capital ($33.01 million), Bluebell Global Holdings ($30 million), Gortane Avatar Investments ($30 million), Palace Investments ($30 million), Jumbo Sheen Amber LP ($30 million), Temasek’s Pavilion Capital ($20 million), Xin BM Investment ($20 million), Newegg Technology ($15 million) and Shanghai Investment Corporation ($12 million). This amounted to a total investment of $422.05 million by the end of the pre-IPO investment round.

 



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