Hong Kong regulators say cryptocurrency-based IPOs aren’t all they’re cracked up to be. As cryptocurrency is still a relatively new venture, many believe that IPOs in the crypto space are premature, which raises questions regarding Bitmain’s latest project.
The Chinese mining giant has said that it would like to raise upwards of $3 billion by the time the IPO ends in late March of 2019. However, Hong Kong’s stock market regulator and operator has shown reluctance when it comes to giving the “okay” to the IPO due to lagging regulation. Legislation surrounding the IPO is still being drafted, and many are concerned about whether this is the right time for such a venture.
The regulator-operator provides policy advice to the Listing Committee of the Hong Kong stock exchange (HKEX). To get a listing aboard the exchange, one must engage in a hearing with members of the Listing Committee. Representatives provide the final say on such matters within six months of all listing requests once questions pertaining to the listings are answered in full.
Granted a listing is not acknowledged within that six-month time frame, it ceases to exist. A rejection of Bitmain’s IPO would potentially be another shocking hurdle to the company’s long-term plans.
A Little Background for You
As of late, the mining business is wrapped up in controversy and lawsuits abound. The company is suing an alleged hacker for roughly $5 million in a Washington state court for reportedly stealing crypto funds from the company’s exchange wallets and moving them into his (or her) own private accounts.
At the same time, the company is also in hot water for allegedly recalibrating all its mining equipment to extract new coins using customers’ computing power until they can reconfigure the miners to their own crypto wallets. In the meantime, they are stuck earning no rewards from the mining operations and are left alone with high energy bills.
Over 100+ former customers have grouped together to form a class-action suit against Bitmain. Individuals are seeking over $5 million in total to cover their energy fees, legal fees and potential damages. Bitmain has denied any wrongdoing.
What’s So Great About This Company?
Founded in 2013, Bitmain is among the largest manufacturers and distributors of bitcoin and cryptocurrency mining equipment. The company has often been accused of centralizing the mining space and poising it for a 51 percent attack, though executives have denied these claims. The company exceeds $1 billion in value, largely due to the bitcoin boom of 2017 which caused a huge surge in demand for the venture’s Antminer devices.
Antminers are special in that they are filled with hundreds of powerful ASICs that can compress data swiftly and accordingly to verify cryptocurrency transactions. The cheapest model goes for roughly $200, though they can go up to several thousand dollars depending on what customers are looking for.
In 2018, the company’s revenue increased tenfold from roughly $700 million to over $2.8 billion. Last June, it was reported that the company held nearly $900 million in cryptocurrency assets alone. The company presently earns approximately 94 percent of its revenue from selling crypto miners and computer hardware.
Sharing the Problematic Limelight
Bitmain isn’t the only mining company with these issues. Recently, competitor Canaan Creative pledged a $400 million IPO in the United States, though it ultimately lapsed in late November.
In addition, the Japanese technology firm SoftBank recently saw its IPO flop upon introduction, with stocks opening at a mere $1,463 yen – significantly lower than the 1,500 yen they typically go for. Shares have since begun to fall even further, with single units going for approximately 1,282 yen at the time of writing. This marks a drop of nearly 15 percent in the last 24 hours.