Why did BitDeer fall on its first day of listing on Nasdaq?

On April 14, amid the recovery of the market and the enthusiastic atmosphere of the Hong Kong conference, the news of the listing of the crypto mining company BitDeer spread throughout the crypto world.

"The completion of our business merger with Blue Safari marks the beginning of a new era for BitDeer," said BitDeer CEO Kong Linghui after the merger transaction was completed.

However, after listing, BitDeer’s stock price continued to fall. Market information showed that its stock price once fell to US$6.3, with the highest intraday decline of about 30%. It fell below the issue price on the first day of listing.

Just two days ago, on April 11, Bitdeer announced that the merger of related companies was approved at the Blue Safari interim shareholders meeting, and the listed company Blue Safari Group Acquisition Corp and Bitdeer will complete the merger on April 13. After the transaction is completed, the merged company will be renamed Bitdeer Technologies Group with the stock code BTDR, while Wu Jihan will serve as chairman and Kong Linghui will serve as the company's CEO.

Why did this crypto company, which is well-known and influential in the market, fail on its first day?

The mining godfather scored twice and finally got listed after five years

BitDeer is owned by Wu Jihan. When it comes to mining tycoon Wu Jihan, I am afraid everyone in the crypto world knows him. Bitmain, which he co-founded, once faced the prospect of going public, but ultimately failed.

In September 2018, Bitmain submitted a prospectus for listing to the Hong Kong Stock Exchange. The prospectus showed that the company's half-year revenue was US$2.845 billion and its net profit was US$743 million. As the absolute overlord of the mining industry, Bitmain once occupied about three-quarters of the global mining machine market. Interestingly, because mining machine production requires self-designed chips, Bitmain once became China's second largest chip design company, second only to HiSilicon.

However, due to various reasons, after several twists and turns, the prospectus submitted by Bitmain expired and became invalid. The company also underwent major personnel changes and structural adjustments. In the end, Bitmain's listing ended in failure.

When Bitmain planned to go public in Hong Kong in 2018, the company's valuation once reached US$12-15 billion. Now, based on the closing price, BitDeer's market value is US$658 million.

Successful listing despite poor performance, weak performance in capital market

Documents disclosed by the SEC show that BitDeer is a cryptocurrency mining company headquartered in Singapore. The company operates six mining data centers around the world, with a total power capacity of 775 MW at the end of 2022. Its business is divided into three major business lines: "self-operated mining", "computing power sharing" and "hosting". All business lines are supported by the self-developed integrated intelligent software platform "Minerplus".

This acquisition adopts the SPAC model that has been widely used by technology companies in recent years. SPAC stands for Special Purpose Acquisition Company. SPAC is a "blank check" shell company that first raises capital from the public and then acquires the target company. The advantage of SPAC is that it can bypass the traditional IPO process, shorten the listing time, reduce the listing cost, and also provide more flexibility and opportunities for the acquired company.

The Blue Safari Group Acquisition Corp., which acquired BitDeer, is such a "special purpose acquisition company". The company is supported by BSG First Euro Investment Corp. Prior to this, mining machine manufacturer Canaan Creative, mining company Riot Blockchain, Hut 8, and crypto lending company BlockFi all adopted the SPAC method to go public.

After going public, BitDeer is expected to receive more financial support to further develop its business. As the "godfather" of the mining industry, the "internal fight" between Wu Jihan and Zhan Ketuan has long been a hot topic, and this article will not go into details. However, after a series of complex events, the final result is obvious - the split of the mining giant Bitmain.

After the split, Wu Jihan acquired part of Bitmain's business. He reorganized this part of the business, including the long-established and prestigious BTC.com mining pool, which was sold. The remaining parts, including cloud platforms, self-owned mining farms and other businesses, have gradually developed into the current BitDeer.

Public documents show that as of December 31, 2022, BitDeer had a net asset value of US$316.3 million, financial forecast revenue of US$330.3 million, and an estimated loss of US$21.7 million.

In the end, BitDeer failed to achieve a satisfactory first-day gain.

The mining industry has undergone a sudden change, and mining companies are struggling to survive

Although the current market has continued to recover, this is not a warm time for miners.

OKLink data shows that the current Bitcoin network computing power is about 342 EH/s and the difficulty is about 48 T. By querying historical data, it is not difficult to find that since the end of the bull market in 2021, the price of Bitcoin has continued to bottom out, but the computing power has steadily increased. The mining costs of miners have not been significantly reduced.

The whole year of 2022 will be a difficult year for crypto mining companies to survive.

However, BitDeer’s main business, whether it is self-operated mining or institutional custody, cannot gain any significant advantages in this market context.

What's more, the ambiguous regulatory trends of regulatory authorities on the encryption industry after listing are a potential uncertainty factor.

In the past year of 2022, many crypto mining companies and listed mining companies have experienced crises to varying degrees. Many mining companies even went bankrupt.

In early September, mining company Compute North became the "forerunner" of this round of mining company bankruptcies. Subsequently, mining company Argo, which is listed on the London Stock Exchange and Nasdaq, announced that its $27 million financing plan had failed, and its stock price plummeted by more than 50%. In December, mining company Bitfarms received a delisting warning from Nasdaq. In the same month, Core Scientific, the once-glorious "largest listed mining company", was sued in a class action lawsuit and filed for Chapter 11 bankruptcy protection.

During the most recent bull run, the mining landscape has changed.

The "old forces" such as family miners and mining pools are no longer new, and the "industrialized" large-scale listed companies' self-operated mining has become the "new trend". This heavy asset business has also caused large industrialized mining companies to bear high debts. In an unfavorable market environment, the leverage ratio of mining companies puts them in great danger. Jaime Leverton, CEO of Canadian mining company HUT 8, made a prediction for 2023 as early as last year - the first half of 2023 will be the peak of the mining company's survival crisis, and she is not sure whether it will ease in the second half of the year.

But for BitDeer, the overall uncertainty of the track may not mean worse. After all, the fall of competitors means more vacant market share. The first day of listing seems to have a poor performance, but this is not the final result. Smart investors will never lack patience.