China’s biggest bitcoin mining company Bitmain Technologies is hoping to raise up to $1bn in pre-IPO private funding even as the falling value of bitcoin has hit demand for its products and brought down prices. The Beijing-based company, which is responsible for mining more than half the world’s bitcoins, is also considering an initial public offering, according to lawyers and bankers, and hopes to be worth $30bn-$40bn in three years. Two smaller competitors have already filed to list in Hong Kong. Bitmain declined to comment.
According to its presentation to investors, seen by the Financial Times, Bitmain is now valued at $14bn and had revenues of $2.5bn last year and net profits of nearly half that amount. In the first quarter of this year, revenues more than 90 per cent of which come from selling mining computers were $1.86bn.
But prices for its superfast bitcoin mining computers have slumped with the price of bitcoin, which is worth now roughly one-third its January peak of $19,343, according to Coindesk. Bitmain is to the crypto industry what shovels were to the gold rush. Its computers solve complex mathematical problems to validate transactions, but this demands serious computing power and electricity and has becomes less viable as the price of bitcoin has fallen.
That has fed through to a fall in demand for bitcoin-mining computers. At Shenzhen’s SEG Plaza, where three of the 10 floors selling electronics are devoted to crypto mining, small children often now outnumber customers; sellers say that last year, Russian, Saudi and domestic buyers were abundant. At many stores, kit that shopkeepers said was selling last December for Rmb30,000-Rmb40,000 ($4,390-$5,850) has been marked down to Rmb3,000-Rmb4,000.
“Last year at this market, there were more Russian than Chinese,” said Leo Li, who works in his mother’s store selling computers and mining gear. “This year they’re all gone.” The slump has spread beyond Shenzhen, China’s Silicon Valley. US chipmaker Nvidia said last month that sales from cryptocurrency products in the second quarter were less than one-fifth of the anticipated $100m. “We are now projecting no contributions going forward,” said Colette Kress, chief financial officer.
Bitmain, whose investors include Sequoia and IDG Capital, has experienced similar volatility in its cash-raising exercise, according to investors who have been approached, in its potential pricing and allocations. “Everyone has an angle,” said one person familiar with the process. “Some investors get an allocation and try to resell it or give to friends who sell it on. It’s almost become a trading thing. Somehow shares are being processed without markets. The valuation is all over the place, too.”
As of the end of March, Bitmain owned $1.2bn worth of cryptocurrency.
Canaan Creative the number two mining company, which claims to have sold the equivalent of 19.5 per cent of the total computing power of all bitcoin mining equipment filed for a Hong Kong listing in May. Last year it made a net profit of Rmb360m on revenues of Rmb1.3bn.