Bitmain, Creator of the Antminer Rig, Has Cancelled Its IPO
“The company allowed its application for its IPO in Hong Kong to lapse after submitting its application six months ago.”
By Block Society
Bitmain Technologies, a large cryptocurrency technology company known for manufacturing Bitcoin mining equipment and hardware, decided to cancel its IPO in Hong Kong. The Chinese based company filed an IPO prospectus six months ago but allowed the application to lapse. Bitmain’s IPO was the world’s largest for a cryptocurrency related company.
Hong Kong was initially hesitant to allow Bitmain to conduct an IPO, while Bitmain continued to advocate for its ability to ensure investor safety. Bitmain Technologies announced that it plans to reapply in the future at “an appropriate time.”
Bitmain produces and sells cryptocurrency mining rigs and designs microchips and hardware for artificial intelligence. The company reported significant losses throughout 2018, claiming a $395 million loss in Q2 alone.
Bitmain has appointed a new CEO and believes that its release of new cryptocurrency mining equipment later this year will increase profits in anticipation of Bitcoin reward halving in May 2020. With Bitcoin prices typically rising before halving, Bitmain believes interest in mining equipment will improve throughout the year.
In response to the prolonged Bitcoin bear market, Bitmain has closed several of its projects and businesses, including its mining farm construction. Since its founding in 2013, Bitmain has raised $785 million, with notable investments from Sequoia Capital China and Temasek, which is a stated owned company in Singapore.
“The Chinese based company filed an IPO prospectus six months ago but allowed the application to lapse. Bitmain’s IPO was the world’s largest for a cryptocurrency related company.
Bitmain found considerable success after the release of its first mining rig, the Antminer S1, which quickly became the standard mining rig for Bitcoin and Proof of Work digital assets. The company continued to manufacture and sell cryptocurrency mining chips and hardware and maintained profitability after the digital asset market stagnated in 2013. The Antminer S7 and S9 were released in 2016, with the S9 model accounting for 60% of all mining rig sales worldwide in 2017. Bitmain eventually controlled 75% of the market for cryptocurrency mining equipment in the United States by the end of 2017, with sales exceeding $2.3 billion.
While Bitmain is set to release a 7mm mining chip that will increase power use efficiency by 30%, smaller competitors are threatening Bitmain’s market share. Although competitors are able to produce less expensive mining rigs using a 10mm chip, Bitmain is the only mining supplier that has regularly produced rigs on time and successfully scaled their operations.
Profits for Bitmain and other mining rig sellers sharply declined in the later part of 2018 when Bitcoin prices bottomed. Rival companies, such as MicroBit, began selling mining rigs for one tenth of their production cost due to depleted demand. Inventory impairment led to a loss of $391 million for Bitmain in 2018 alone.
With Bitcoin halving set for May 2020, investors are expecting Bitcoin prices to begin to recover. Historically, Bitcoin bull runs correspond with halving. Bitmain hopes that the impending halving will reignite interest in mining. Combined with the energy efficiency of the 7mm chip, Bitmain believes it will once again become the industry leader of mining rigs.
Bambrough, Billy. 29 March 2019. Blow to Bitcoin as Largest Cryptocurrency IPO is Iced. https://www.forbes.com/sites/billybambrough/2019/03/29/blow-to-bitcoin-as-worlds-largest-cryptocurrency-ipo-is-iced/#4550577f68c3
Huang, Zheping. 27 March 2019. Inside the Rise and Fall (and rise?) of Crypto Mining Giant Bitmain. https://www.scmp.com/tech/start-ups/article/3003517/inside-rise-and-fall-and-rise-crypto-mining-giant-bitmain