Bitmain has been getting a lot of attention this week, that’s for sure. The well-known producer of bitcoin mining hardware, application-specific integrated circuits miners (ASIC), and new ether mining rigs in the similar realm, has said that it’s considering an initial public offering (IPO) of their own in Hong Kong later this year. Yes, you read that correctly. Bitmain is considering an IPO, not an initial coin offering (ICO), like many may have expected given the nature of the company. If the Beijing-based company is successful in its IPO and raises a whopping $18 billion, it will bring the mining company’s valuation at somewhere between $40 to $50 billion dollars. If everything goes well, that would make Bitmain among the top five largest IPOs of all time near Alibaba and Facebook.
Pre-IPO Funding Partners…or Not?
However, the news has been more on the odd side of things for investors. Rather than a roaring confidence at the news of the company going public, we’re instead left with many institutional investors saying that they were not involved with Bitmain in the past and will not be participating in funding in the future, even though rumors leaked that they were. Big names in the financial world like Tencent, Softbank and China Gold Investment were rumored to be interested in the mining company, but it’s looking like that’s not actually the case.
Cointelegraph reached out to the actors purportedly involved in the pre-IPO financing deal with Bitmain only to find out that no such deals were made. After reaching out for a response from Softbank, Kenichi Yuasa of the Corporate Communication Office of Softbank Group Corp. told Cointelegraph that:
Neither the SoftBank Group Corp. nor the SoftBank Vision Fund were, in any way, involved in the deal.
Additionally, the outlet tried to contact Tencent and Bitmain for comments, confirmations, or denials, but was able to get no such comments from either party. Coindesk, on the other hand, received an email from a spokesperson with Tencent saying that the company is “not involved in this investment…The news is not true.” This just raises more questions for would-be investors about the company.
For many, the decision to go public with an IPO rather than an ICO may seem like a credit booster. After all, it should be easier for Bitmain to stay well within the regulatory requirements of having an offering since the requirements are actually known—unlike the world of cryptocurrencies and global ICOs. There aren’t any questions about which retail investors are allowed to participate once the company goes public and, perhaps more importantly, it offers the company access to traditional sources of funding that may want exposure to the cryptocurrency industry without directly investing in cryptocurrencies themselves. But the entire process is unsettling for investors looking at one of the dominant figures in the cryptosphere for other reasons as well.
Betting on BCH
The next concern investors have is the gamble Bitmain took on bitcoin cash (BCH) over bitcoin (BTC). Blockstream CSO Samson Mow Tweeted out an image from the Bitmain pre-IPO investment deck that shows large amounts of bitcoin (BTC) were sold off to purchase bitcoin cash (BCH) in early 2018. According to the Tweet, the average price of BCH when Bitmain made the decision to buy was around the $900 mark. For those who aren’t keeping track of prices, BCH is trading right around $530 at time of writing. Yes, a pretty significant drop without the type of market BTC has.
According to the Bitmain pre-IPO investor deck, they sold most of their #Bitcoin for #Bcash. At $900/BCH, they've bled half a billion in the last 3 months. If Bitcoin Core devs didn't disclose the Bcash vulnerability, it could've wiped a billion dollars off their balance sheets. pic.twitter.com/9BMywdvvby
— Samson Mow (@Excellion) August 11, 2018
Is Mining on the Way Out?
The last thing investors are accounting for is the future of cryptocurrency minin. Bitmain is a major player in the world of mining with not only their hardware, but their mining pools as well. However, what’s the future likely to hold for the company and their products?
Crypto mining itself is still continuing at a reasonable pace, but we already know that GPU sales from companies like Nvidia and AMD are no longer on the massive run that they were on during the middle of “crypto mania.” Chip producers are still doing well, but they’re anticipating crypto-related purchases of their hardware to play a significantly lesser role forward. 2017 was a great boost, but it’s clearly not going to continue forever.
One of the most talked about topics in the cryptocurrency world right now is on the future of mining and consensus mechanisms. Many don’t like the energy consumption and inefficiency associated with the traditional Proof-of-Work (PoW), so people are looking to alternatives. Proof-of-Stake (PoS) and its variants look set to take over for the future of cryptocurrency, especially if there’s a successful switch for the Ethereum network.
Of course it’s true that really only time will tell, but a Bitmain IPO is looking less desirable by the minute. Though the company will probably remain one of the biggest names in the industry for now, one can’t help but think they might be a behemoth of the past. At this point in the crypto world, investing in Bitmain feels a bit like opening a long position in the fossil fuel automotive industry while the world is acting against them. With clean energy initiatives taking over, electric vehicles coming from more manufactures than just Tesla and BMA, and becoming more affordable, traditional fossil fuel vehicles seem like a bad play. Of course, Bitmain can always pivot to other uses of their machines and hardware, but things don’t look fantastic. Maybe they’ll start focusing on AI? Maybe they can start rendering on an enterprise level with new equipment? I don’t know, but it’s hard to tell where one even starts with this IPO.