China's Bitmain pulls plug on Hong Kong IPO

The company’s sales are largely driven by Bitcoin prices. They grew nearly tenfold to $2.5 billion in 2017 as the cryptocurrency rose from $1,000 to $18,400. The price has since collapsed to $3,907. Bitmain filed to list last September and had six months to complete an offering or renew its application. The company said it would restart the process “at an appropriate time in the future.”

“We do recognize that despite the huge potential of the cryptocurrency and blockchain industry, it remains a relatively young industry which is proving its value. We hope regulatory authorities, media, and the general public can be more inclusive to this young industry,” Bitmain said in a blog post. The company added that the experiences of 2018 had led to a streamlining of its business.  

Changes include the appoint of Haichao Wang, formerly the director of product engineering, as CEO. He replaces Micree Zhan and Jihan Wu, Bitmain’s co-founders. They remain directors and majority shareholders in the company.

Bitmain was established in 2013 and has received nearly $785 million in private funding, most recently rounds of $292.7 million and $442 million that closed in June and August of 2018, respectively. The earlier of these rounds is said to have valued the company at $12 billion. Sequoia Capital China, Advantech Capital, Sinovation Ventures, Temasek Holdings, Frees Fund, Crimson Partners are among the investors.

The company claims to be China’s second-largest designer of fabless chips, which are used for cryptocurrency mining and artificial intelligence (AI) applications. It accounted for nearly three-quarters of global cryptocurrency mining hardware sales in 2017, primarily through application specific integrated circuit (ASIC) chips sold under the Antminer brand.

Other business lines include AI chips and managing mining farms. Bitmain can put its customers’ hardware to work in these farms, operating mining pools where miners combine computing power and split the rewards. As of June 2018, the company had 11 mining farms in China and operated the world’s two largest mining pools.

Bitmain said in the blog post that there had been job cuts as part of efforts to focus on cryptocurrency and AI chips, as well as products and services based on such chips. Resources for chip design, hardware and software have been integrated to ensure enough attention is paid to core business areas.

Antminer hardware accounted for the vast majority of revenue in 2017, although the cost of sales – principally contract manufacturing and raw materials – also rose tenfold over the preceding 12 months. Bitmain posted net profit of $701.4 million for 2017, up from $113.6 million in 2016.

In addition to seeing volatility in sales due to changing Bitcoin prices, the company also has substantial cryptocurrency holdings itself. In 2017, it received $855.3 million in cryptocurrency as payment for its hardware and its cryptocurrency balance was $886.9 million as of June 2018, or 28% of total assets.

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• Topics
• Greater China
• Technology
• Financials
• IPO
• China
• Sequoia Capital
• Sinovation Ventures
• Frees Fund
• Advantech Capital
• Temasek Holdings