This week, it was reported that the co-CEO of Bitmain Technologies, the world’s largest cryptocurrency mining company, has revealed plans to conduct an initial public offering in Hong Kong. The IPO would give early investors, including Sequoia Capital and IDG Capital, an opportunity to cash out.
With the crypto market rapidly changing, Bitmain’s IPO will be a litmus test for institutional investors looking to enter the cryptocurrency market, and could also pave the way for other crypto companies to follow suit.
Please see below comments on the topic from Rohit Kulkarni, Managing Director of Private Investment Research at SharesPost
On Chinese IPOs:
“Recent global IPO trends point to one unmistakable fact: The IPO market is booming. This is the best IPO market we have seen in many years. If you’re a tech firm with a strong value proposition and brand, now is as good a time as any to go to the public markets. With Hong Kong’s relaxed listing rules supporting dual-class shares along with New York’s deeper pool of tech savvy investors, we believe China’s new economy companies have the best of both worlds, as far as attracting prospective public equity investors is concerned.”
On Bitmain Technologies IPO:
“News about Bitmain’s IPO follow filings done by its main but smaller competitor, Canaan. Last month, Canaan Inc., a maker of cryptocurrency-mining equipment, applied to the Hong Kong Stock Exchange. Clearly, these IPOs will be a litmus test for the broader cryptocurrency ecosystem among institutional investors. Given Bitcoin’s market leadership, and reported profitability, we would be surprised if this IPO receives anything less than a warm reception on public markets. On the flip side, Bitmain faces security risks, exposure to cryptocurrency price volatility, and growing competition.”
On fundamental risks facing Miners:
“Additionally, bitcoin mining hardware companies such as Bitmain and Canaan face market viability risk. With less than 20% of bitcoins remaining to be mined, continued viability for the mining market assumes transaction fees will provide sufficient compensation as bitcoin rewards eventually go away. As the law of diminishing returns continues to affect mining operations, hardware companies will face increased pressure to both significantly improve the efficiency of their machines and provide those machines at lower price points.”