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Is Bitmain Ready for an IPO?

September 27, 2018

 

By now, if you have any experience with Cryptocurrencies, especially with mining, then you know something about Bitmain.

 

The real question is: do you know the truth about how they make their money? Recently, a lot of speculation has hit the Crypto news outlets after Bitmain announced its intentions to have an Initial Public Offering, before the end of 2018.

 

While, it would be inadvisable to take all of these reports as true at face value, it can also be said that through analyzing the data that is out there, certain conclusions can be drawn as to whether or not Bitmain should go through with their latest goal.

 

Rising above the rest in terms of their publications on the subject, is Coindesk. From what was arguably the beginning of Bitmain’s status as Crypto’s mining leader in 2017, they have been publishing pieces on every sort of news about the company, including on its finances.

 

Now, with the official release this week of its prospectus for its Hong Kong IPO, much more information is available to analyze, on the same level as an internal report by a publicly traded company.

 

Because of this, Coindesk has released another piece on the subject, which appears to have the universal goal of shedding further light on the inner workings of the company, including on what its primary revenue streams actually are.

 

After understanding the key conclusions of this article, it can be argued that parts of Bitmain’s inner workings may have great implications on its future in the Blockchain industry after its IPO.

 

First and foremost with regards to these conclusions is Bitmain’s true revenue breakdown. If any readers are interested in seeing this in its original form, most of the relevant information is located on page 189 of the previously mentioned prospectus.

 

In a nutshell, what might be said to be the most striking finding with respect to this breakdown is that from 2015-2018, the major part of Bitmain’s revenue came from selling mining hardware and not from, its own mining of Cryptocurrencies. More specifically, in 2015, this was a question of $107.9 million versus $27.9 million, in terms of its mining hardware sales versus its proprietary mining.

 

In 2018, by contrast, its mining hardware sales have, up to June 30th, ballooned to around $2.7 billion, while its other revenue streams have fallen further behind. According to the Ledger Insights Blog, this amounts to 90% of its revenue this year, coming from hardware. Because this is true, it can first be said that Bitcoin.com’s statement was correct, that most of Bitmain’s profits came in the last year.

 

While this was corroborated, other areas still remain in question, at least until further analyses of the upcoming IPO’s required documents are published.

 

In the interest of simplifying these possibilities for the purpose of clarity, we will stick with one for now, which is the question of the legitimacy of Bitmain’s operating cash flow. Again, if you are interested in reading these numbers straight from the source, taking a look at page 11 of the prospectus is a good place to start.

 

Suffice it to say that nothing has been published to refute the allegations to the effect that Bitmain might be illiquid. If you are wondering why this could be true, take at look at articles like Cryptoslate’s piece on the possibility of Bitmain misleading investors, which was published on August 21.

 

In a nutshell, because Bitmain holds a large part of its funds that it uses to operate or conduct daily business in Cryptocurrencies, the inherent volatility of the market could be considered to be a growing risk, as of now.

 

Beyond this, only the IPO and time as a publicly traded company will determined if this will prove to be fatal for the company. In addition to this reliance on Crypto, given that it has been moving away from mining on its own, more and more, it is reasonable to question the motivation of this IPO.

 

Is it to spread Crypto to the traditional world or pivot a company that cannot completely rely on what they see as too much of a volatile market?

 

 

By: BGN Editorial Staff

 

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