The Risky Factors Emerge from Bitmain’s IPO Statement: the ICs, Tax and Regulatory issue
September 26, Bitmain Technologies, the Chinese cryptocurrency mining giant finally released its public financial statements for the first time, thoroughly exposed its ambition of going public on the Hong Kong Stock Exchange (HKSE). The China International Capital Corporation Limited (CICC) will hold the post of the lead underwriter of Bitmain’s IPO.
In the previous few months, Bitmain’s financial situation causes doubt and resentment. This financial statement is here to clarify this issue. It shows Bitmain’s revenue increased from US$ 137.3 million in 2015 to US$ 2517.7 million in 2017, representing a CAGR of 328.2%. Its also raked in $742.7 million in profit for the first six months of 2018, increased by 794.8% from US$83 million for the same time period in 2017.
These data shows the firm is still making the money. According to the report, we can see it gets most of its revenue from mining equipment sales, as well as its mining pool services, mining farm and proprietary mining. In 2017, the mining hardware sales contributes 89.9% among its total revenue.
The sales of Antminer, the main product of Bitmain brings billions of dollars to Bitmain in cryptocurrency, however, it also brings out the issue of asset value shrinks due to the crypto market slumps, as Bitmain has about 30 percent of its assets in cryptocurrencies.
In addition, According to industry insiders, IC is the core of the mining rigs. However, according to the statement, Bitmain is a fabless IC design company, they do not own any IC fabrication facilities and the TSMC is the only third-party foundry partner of Bitmain.
For the years ended December 31, 2015, 2016, 2017 and the first half year of 2018, the value of the ICs Bitmain purchased from TSMC accounted for 44.8%, 58.5%, 58.6% and 59.2% of its total procurement for the respective periods.
It further draws a risky issue as if any failure to obtain sufficient foundry capacity may adversely affect their business operations while TSMC has not made any relevant capacity guarantees.
Further more, the tax issue and the regulatory issues on the on cryptocurrencies are also risky factors to Bitmain.
An industrial insider indicated that,”Regulatory policies are getting more and more strict in China , crypto trading platforms cannot be legalized. It is still hard to say whether the mining industry can survive or not.”