Attack of the Miners: Understanding Bitmain’s Path to IPO in One Article

• Market competition after three rounds of financing before listing

As the world's largest Bitcoin mining machine manufacturer, the news of Bitmain's pre-IPO has caused a stir. Recently, Bitmain has completed its Pre-IPO round of financing, which can be said to be the largest blockchain IPO in the world. It is backed by first-tier assets such as Tencent, IDG, and Sequoia. Whether it is successfully listed or not, it will definitely be a milestone event in the blockchain field.

In fact, Bitmain, known as the "mining tyrant", is not short of money. KPMG's financial audit said that in 2017, Bitmain's net profit was US$1.2 billion, with a net profit margin of about 50%. In the first quarter of 2018, Bitmain's net profit reached US$1.1 billion. According to conservative estimates, the company's net profit for the whole year may reach US$2 billion to US$3 billion. At the same time, Bitmain has abundant cash on its books and no short-term loans.

So, why did Bitmain, which was founded only 5 years ago, choose to go public and raise funds at this time?

• What is the intention of the integration of multiple parties? There are different opinions

There are different conclusions on this. 36Kr has said that an IPO will not only allow Bitmain to face the world openly, but also reflect the value of their company in real time through the reaction of the stock market. The reason for doing so may be that the company hopes to give early investors including Sequoia Capital and IDG Capital the opportunity to cash out and exit successfully.

After the Bitcoin craze in 2017, the ensuing bear market may also be the black swan that prompted Bitmain to go public to protect itself. From the price of the coin approaching $20,000 last year to below $6,000 this year, the profit of mining machines is linked to the value of the coin. In a bear market, the sales and prices of mining machines will plummet. The reaction of mining machine manufacturers to the downstream market will lag slightly behind the fluctuation of the value of digital currencies by 1-2 months. No one can predict how long the bear market will last, so Bitmain must seize the window period of the first quarter of 2018 when the valuation and profit are still good.

In addition, Bitmain’s biggest competitor, Canaan Inc., has already applied for an IPO in Hong Kong. Considering that a later listing may affect its valuation, perhaps this listing is also intended to be preemptive and to seize public opinion traffic.

In addition to the impact of strategic layout and cryptocurrency market fluctuations, Bitmain also has to consider the risks that policies may bring. Last year, the Chinese government banned ICOs; this year, the government sent a signal that mining may be severely restricted. When the policy direction changes, continuing to focus on mining machines may lead Bitmain into danger. Therefore, after choosing artificial intelligence chips, an industry with a long return cycle, as the direction of transformation, obtaining sufficient funds from the secondary market through listing has naturally become an important choice for Bitmain.

• Accelerate the expansion of the strategic layout of seven countries in three continents
  

In addition to preparing for the IPO, Bitmain is also expanding its territory and accelerating the expansion of its mining machine business overseas. The United States, Israel, the Netherlands, Switzerland, Canada, Singapore, and Russia have now expanded their reach to seven countries in Southeast Asia, the Americas, and Europe.

According to cryptovest, Bitmain plans to build mining facilities and blockchain data centers in Texas, USA next year. The new base will become an important part of its "North American strategic investment and expansion plan." At the same time, Bitmain has opened a 20,000 square foot office area in the heart of San Jose, Silicon Valley, USA, close to many technological innovation companies.

Industry insiders explained this overseas expansion strategy as follows: on the one hand, the domestic mining machine market has entered a relatively saturated stage; on the other hand, domestic mining farms have a tendency to move overseas, and the overseas mining machine market has certain potential. In addition, the electricity prices in some countries are low, so this move will undoubtedly bring more profits to Bitmain.

• Conclusion

AI chip transformation, overseas expansion, listing... Just like when it was faced with the choice between mining machines and exchanges, every step of Bitmain seems to be very accurate, but what the final result will be, we can only leave it to time to verify.