Bitmain is about to go public in the US, raising more than $1 billion: core financial data exposed

In June this year, Bloomberg reported that Bitmain had initiated its IPO in the United States and would submit its IPO application by the end of July at the earliest. Now, July has passed, but there is still no public IPO document for Bitmain.

However, another mining machine manufacturer, Canaan Creative, has secretly submitted an application for listing to the U.S. Securities and Exchange Commission (details: Canaan Creative, the world's second largest Bitcoin mining machine manufacturer, has secretly submitted an application for listing to the SEC).

However, Uncle C recently obtained Bitmain’s latest financial information from relevant sources, and he would like to share some of the core data with you.

On September 26, 2018, Bitmain submitted an IPO application to the Hong Kong Stock Exchange. The document shows that the two founders, Zhan Ketuan and Wu Jihan, are the main shareholders, holding 36% and 20% of the shares respectively.

Since its establishment, Bitmain has received three rounds of financing, which took place in August 2017, June 2018 and August 2018. Among them, Bitmain completed more than US$700 million in financing in the second half of 2018.

As of the time of the release of the prospectus, the shareholding ratios of major investment institutions were not large: Sequoia Capital held approximately 3.14%, Innovation Works held approximately 1.13%, Temasek held 0.35%, IDG Capital and Beijing Integrated Circuit Industry International Fund held 0.02% and 0.07% of the shares respectively.

Valuation: $13 billion to $15 billion

The information given to Uncle C by the above-mentioned investor is that Bitmain is attempting to go public with a valuation in the range of US$13 billion to US$15 billion, with an estimated fundraising of US$1 billion to US$1.5 billion .

If true, this valuation would be a small increase from the valuation of around US$12 billion in the second half of 2018, and would be much higher than the valuation of “only” RMB 50 billion given by the Hurun Greater China Unicorn Index in January this year, even though Bitmain ranked 11th on this list.

What can support such a valuation is obviously the fact that Bitmain’s financial data has improved again. Uncle C also got Bitmain’s financial statements for the first quarter of this year.

Profit of $315 million in March

In the first quarter of 2019, Bitmain's total operating revenue was US$1.082 billion, of which the revenue in the first three months was US$253 million, US$253 million and US$578 million respectively; the gross profit was US$7.91 million, US$14.7 million and US$25.21 million respectively; the net profit reached US$315 million only in March, with losses of US$345 million and US$280 million in January and February respectively.

Judging from the net profit and gross profit alone, the data is obviously not so satisfactory. For this reason, Bitmain’s internal view is that the first quarter was mainly to clear the inventory, especially the 16nm mining machine inventory at a low price, which led to a low gross profit margin; after the old products are cleared, the sales of new 7nm mining machines will drive the gross profit margin to rise, and the gross profit margin in April is expected to reach 30%.

The fourth quarter is expected to usher in an explosion

In addition, given that mining machines are futures products and that Bitmain has placed an order for 200 million 7nm chips with TSMC, Bitmain expects its financial report to achieve explosive growth in Q4.

Regarding the new 7nm mining machine product, Bitmain’s internal opinion is that the concept of 7nm mining machine was proposed in 2018 and is currently being produced in China and Japan; Bitmain is the only 7nm mining machine manufacturer with the ability to mass produce and ship.

Here, Uncle C thinks it is a good idea to make an intuitive comparison with the prospectus. The prospectus shows that Bitmain's revenue, gross profit and after-tax profit in 2017 were 274 million, 134 million and 83 million US dollars respectively; while the revenue, gross profit and after-tax profit for the whole year of 2017 were 2.518 billion, 1.213 billion and 701 million US dollars respectively. From this data, it is obvious that the main source of contribution to the full-year revenue still depends on the performance in the second half of the year .

Therefore, Bitmain's sales forecast for the whole year is that due to customers' prepayment for mining machines, Q3's cash flow will be stronger, but because there is not much inventory and TSMC needs 3 to 4 months to produce the chips, Q4 will be the main time node for shipment and revenue confirmation.

In addition to the 7nm mining machine mentioned above, the AI ​​product line is also the direction that Bitmain focuses on developing this year.

Uncle C mentioned this in his article in June this year (related link: It is reported that Bitmain will apply for listing in the United States next month, and was previously declared "death penalty" by the Hong Kong Stock Exchange). Bitmain began to enter the AI ​​field at the end of 2015. The research and development content includes AI chips, boards, servers, and various hardware and software products and customer development platforms. The main directions of layout are security, campus, smart city, and Internet fields.

At present, Bitmain has launched three products equipped with the cloud chip BM1684. In the first quarter of this year, it reached cooperation with China Unicom, China Mobile Hangzhou R&D Center, etc. , and its revenue in Q1 was nearly 32 million yuan.

Bitmain has digital currency assets worth hundreds of millions of dollars

As for the assets and liabilities, Uncle C also got the data at the end of March and the end of May. As of the end of May, Bitmain's total assets were about US$1 billion, and the company's debt ratio after excluding preferred shares was 16%.

In addition, Uncle C also obtained Bitmain’s internal reflection and judgment on the IPO process. Regarding the failure of the Hong Kong IPO, Bitmain believes that it is mainly because the rapid drop in the price of the currency in a short period of time has caused regulators to doubt the sustainability of its business.

It is worth mentioning that Bitmain has currently determined that it has no chance of being listed on the Science and Technology Innovation Board and has chosen to go public in the United States.

Uncle C’s view is that although Bitmain currently has a market share of over 70% in the digital currency mining machine market and has sufficient cash flow, the date for its official filing will definitely not be too long .

After all, the only feasible listing locations for these three mining machine manufacturers are currently the United States. Once Canaan Creative or even Ebang International has a significant lead in the listing progress, the order of time in the same competition will have an unignorable impact on the subsequent listing process and market performance.

The ability to design chips is a moat for entering the AI ​​field, and quickly raising enough funds will also help Bitmain further expand its layout in the chip and AI fields. Bitmain even stated in the documents given to investors that its ultimate goal is to become a technology-based commercial company.

Author: Uncle C

Source: IPO Early Knowledge (https://mp.weixin.qq.com/s/rDxpwVLl28Eg0HAhqnXPCg)