BY Risen Jayaseelan - October 17, 2018
Bitmain IPO faces more hurdles
IPO investors of Bitmain’s stock have yet another risk factor to contend with – US trade sanctions.
The South China Morning Post (SCMP) reported that as the US-China trade sanctions escalate, Bitmain will face harder times with its shipments to the US.
Bitmain along with two other China-based cryptocurrency mining equipment makers, namely Canaan and Ebang, have filed for billion dollar IPOs in Hong Kong.
SCMP reported that analysts reckon Bitmain is more exposed to US trade barriers compared with the other two miners.
The report also said that due to reclassifications by the United States Trade Representative of Bitmain’s mining hardware, the latter is now subject to a whopping 27.6% tariff on their US shipments, compared to zero previously.
CryptoNewsAsia reported late last month that investors looking at Bitmain’s IPO ought to understand the following risks:
- the crypto sector’s possible move toward proof of stake which would substantially reduce the need for mining equipment
- whether Bitmain’s earnings are sustainable
- what is Bitmain’s strategy of holding the controversial cryptocurrency called bitcoin cash or BCH (which led Bitmain to take an impairment hit of US%102.7mil in 1H2018)
- the discount to IPO price at which Bitmain’s recent series B and B+ investors got in, whether that was justified and whether those investors will be subject to any lock up period
It remains unclear how soon these companies are likely to get listed, considering the long waiting list for Hong Kong IPOs.
It also is surprising that Bitmain, which is reported to be looking to raise at least US$3bil from the listing, has not appointed any international banks yet for advisory roles.
One Hong Kong-based banker tells CryptoNewsAsia: “It may have been challenging for the western banks to secure internal clearance to be key advisors to Bitmain’s IPO. That said, they are likely to swoop in later as coordinators, which requires less responsibility but gives them the same glamour.”
The banker remains positive though on Bitmain’s prospects. “Investors are nervous but they will buy at the right price for sure. The advising banks will play up the hardware play rather than the crypto exposure,” he says.
Some traditional investors looking at Bitmain’s IPO are also likely to be spooked by the anti blockchain and cryptocurrency tirade being unleashed by economist and New York University professor Nouriel Roubini.
Reports are also emerging that the US government is increasingly concerned about the concentration of bitcoin mining in China.