If Bitmain fails to go public, who will be the beneficiary?

This article comes from FT , Cryptocoinsp , Financemagnates , original author: Aziz Abdel-Qader, Louise Lucas, Mark Hartley

When cryptocurrency mining giant Bitmain announced its IPO on the Hong Kong Stock Exchange last September, the entire crypto industry looked promising. However, many people did not expect the subsequent bear market to be so long, and the Bitcoin Cash (BCH) hard fork war caused a severe market downturn, and many blockchain companies around the world suffered heavy losses - Bitmain was no exception.

Although Bitmain is one of the largest and most successful cryptocurrency mining chip manufacturers to date, can they really represent the "hope of the whole village"? In fact, since announcing that it would apply for an initial public offering (IPO) on the Hong Kong Stock Exchange, Bitmain has been embroiled in controversy over investors and earnings, and some large investors have begun to distance themselves from them. According to previous reports, Bitmain's losses in the third quarter of 2018 amounted to as much as $500 million, and due to the uncertainty of the cryptocurrency market price, they may also try to sell off a large amount of Bitcoin Cash (the current price is only one-sixth of that in May 2018).

According to Hong Kong listing rules, although the approval time for a listing application is six months, the applicant can renew the application. In this case, according to the latest "Disclosure" data of the Hong Kong Stock Exchange, Bitmain's IPO application submitted on September 26, 2018 will expire on March 26, 2019. However, Bitmain has not submitted any investor presentations so far, so many people in the banking industry believe that the listing will become "highly unlikely".

An anonymous source familiar with the matter said:

“I think the overall environment is still difficult for Bitmain, and it is also under considerable pressure.”

China International Capital Corp, the sole underwriter of Bitmain’s IPO, has not yet commented on the matter.

There is no smoke without fire. In February this year, there were rumors in the market that the two co-founders of Bitmain had major differences of opinion and it was difficult to make a unified decision. Therefore, Wu Jihan would resign as CEO of Bitmain and start a new company.

As the deadline for listing applications approaches, I, like everyone else, must have this question in my heart: if Bitmain really cannot successfully list on the Hong Kong Stock Exchange, who will become the "fisherman" who profits in the mining machine market and seize the "crown" in the cryptocurrency mining industry?

The biggest beneficiary in the overseas mining machine market

In the overseas market, Bitmain has two biggest competitors, one is BitFury and the other is SBI Holdings. BitFury is headquartered in Amsterdam, the Netherlands, and operates data centers in Iceland and Georgia. Perhaps seeing that Bitmain has no hope of going public, BitFury has recently gained popularity in the cryptocurrency mining industry, and they have also joined forces with the HadePay payment network to promote lightning network payments and increase the popularity of Bitcoin.

Last November, BitFury successfully raised $80 million in financing, led by venture capital group Korelya Capital, bringing its total financing amount to $150 million and the company's valuation to $1 billion, making it a "unicorn" in the cryptocurrency industry. As it has expanded from mining business to blockchain software development and has been listed in the Forbes Global 50 Fintech Companies, BitFury may be the competitor that most hopes Bitmain will fail in its IPO, and is more likely to use this opportunity to "overtake on the curve."

Another Japanese financial services provider, SBI Holdings, has previously announced the production of cryptocurrency mining chips through its subsidiary SBI Mining Chip Co. Ltd. The company is also very interested in the blockchain industry and has invested heavily in the cross-border payment platform Ripple. If the time is right, the leading mining giant may also use this opportunity to gain a larger market share.

The biggest beneficiary in the domestic mining machine market

In addition to overseas markets, there are also two chip manufacturers in China that pose a greater threat to Bitmain, one is Canaan Creative and the other is Ebang.

In fact, Canaan Inc. submitted an IPO application to the Hong Kong Stock Exchange as early as May last year, but the Hong Kong Stock Exchange had doubts about its business model and prospects, which led to its listing plan being thwarted. Canaan Inc.'s application for listing on the Hong Kong Stock Exchange expired in November last year. However, just two weeks ago (in mid-March 2019), Canaan Inc. completed a financing of hundreds of millions of dollars, with a valuation of billions of dollars. With the support of well-known investment banks such as Morgan Stanley and Deutsche Bank, Canaan Inc. is likely to choose to go public in the United States next. In this way, Canaan Inc. seems to be ahead of Bitmain every step of the way, and its transformation response, action and speed are very fast.

The IPO application of Ebang, another company that also plans to list on the Hong Kong Stock Exchange, will expire in two months, that is, in May 2019. However, unlike Bitmain, which has been plagued by turmoil, Ebang has always been eager to seek breakthroughs in the mining industry, and announced in February that it will produce 400,000 mining machines throughout 2019.

However, the Bitcoin mining industry seems to have turned around recently. The Bitcoin hash rate has reached its highest level since early November 2018, and is even more than four times the hash rate when the Bitcoin price reached its all-time high of $20,000 in December 2017! According to data disclosed by Blockchain.com, the Bitcoin hash rate has risen to a year-round high of 52 EH/s on March 19, which means that the demand for cryptocurrency mining is becoming greater and greater.

As this continues to unfold, it will be interesting to see which mining company ultimately succeeds in its IPO. Who do you think will be the first mining company to go public?