Bitmain’s problems mount as crypto declines cast doubt on IPO plans

According to reports, Hong Kong Stock Exchange regulators are reluctant to sign off on the large share offering proposed by mining giant Bitmain. 

In the face of declining mining revenues, falling sales of its equipment, a large stash of Bitcoin Cash that is rapidly dropping in valuefooting the bill for its support of Bitcoin ABC in the Hash War against Bitcoin SV and proposed legal action arising from that and other matters, Bitmain could now be facing its Initial Public Offering (IPO) of shares being rejected by the Hong Kong Stock Exchange (HKEX).

According to reports citing “a person involved in the talks”, HKEX is reluctant to approve its $14bn proposal, due to the decline of the cryptocurrency market during the year, and the general volatility of the sector in general. It would have made Bitmain the largest publicly listed mining concern by some way – a title that will soon be company formed by the merger CoinGeek and Squire Mining, which will be publicly listed in Canada and majority owned by Bitcoin SV main-man Calvin Ayre.

Coindesk quotes its source on the matter as saying that HKEX “s very hesitant to actually approve these bitcoin mining companies because the industry is so volatile,” before adding it was told there was a “a real risk that they could just not exist anymore in a year or two.”

The bottom line, according to the source is that “The HKEX doesn’t want to be the first exchange in the world to approve this and have one die on them.”

No official source from any of the entities concerned was willing to go on the record over the matter. However, competitor and fierce rival during the highly acrimonious Bitcoin Cash contretemps, Calvin Ayre, was more than happy to comment on the matter via Twitter, asserting that “nothing is going to IPO in this space now.

Bitmain filed its IPO proposal back in late September, which means it now has until the end of March to get approval from HKEX and the Hong Kong Securities regulator and move the process forward to the hearing stage before its proposal lapses. One other mining IPO proposed to HKEX – that of Canaan – has already fallen at that hurdle during the course of 2018, with another only weeks away from missing its window.

Having already raised $1.3bn in so-called Series B private investment during 2018, the valuation of Bitmain was the subject of rumour and conjecture for months. Early in 2018 estimates predicted it could exceed Facebook’s $16bn valuation, though the decline in mining during the course of the year seems to have scuppered that.

When the IPO finally did arrive, the debate had shifted to what it would reveal about the internal finances of the world’s biggest Bitcoin miner, and integral party in the creation of Bitcoin Cash. Thus it was eyed with a far more rigorous eye than it perhaps would have been in more bullish times.

Though the valuation put forward to HKEX was redacted from the 400+ page IPO document, it was widely rumoured to be around $14bn at the time – based on quoted revenues of $2.84bn for the six months up to June 2018. Its unlikely that revenues have been close the that in the second half of the year, nor that its large holdings of cryptocurrency are leaving it anywhere near as cash rich as it was looking in early 2018 – with many positing that the IPOs revelations about large holdings of Bitcoin Cash will only have led to a much worse financial situation at this point.

The role of on of Bitmain’s founders, Jihan Wu, in the recent fork of the Bitcoin Cash blockchain – and his unwavering support for the Roger Ver-fronted Bitcoin ABC – raised many eyebrows too. Many pointed to Wu as the fixer providing the massive blast of Hash Power that ABC rolled out to fight off any attempt to attack its blockchain by the opposing Bitcoin SV team – a move that has attracted consistent ire from SV’s major players, and also legal action.

CoinGeek’s Calvin Ayre has been more than happy to drive the knife in on his competitor over its recent woes, and was quick to jump on the legal action – which is coming from a company with interests intertwined with his own and company he will soon take a large stake of – as an extension of this. What role that will play in the larger picture of Bitmain’s fortunes remains to be seen.