Bitmain, the Beijing-based company that is the world’s largest manufacturer of ASIC-based crypto mining hardware, is reportedly filing for an initial public offering (IPO) this September, which could raise as much as $18 billion. This article examines the crypto community’s reaction to this news.
It all started on 12 August 2018 when Twitter user “Samson Mow” (@Excellion), who is the chief strategy officer (CSO) of Blockstream, made a post with an embedded image showing what appears to be a slide from Bitmain’s Pre-IPO investor deck:
According to the Bitmain pre-IPO investor deck, they sold most of their #Bitcoin for #Bcash. At $900/BCH, they've bled half a billion in the last 3 months. If Bitcoin Core devs didn't disclose the Bcash vulnerability, it could've wiped a billion dollars off their balance sheets. pic.twitter.com/9BMywdvvby
— Samson Mow (@Excellion) August 11, 2018
The first group of columns is “Quantity”, the second is “Average Price (USD)”, and the third is “Asset Value (in thousands of USD)”. This means that between 31 December 2016 and 31 March 2018, Bitmain’s BTC holdings went from 71,560 to 22,082, while its BCH holdings went from 0 to 1,021,316.
George Kikvadze, the Vice Chairman of the Bitfury Group, had this to say in response about the apparent selling by Bitmain of BTC for BCH:
Respect our Chinese Competitors, but Selling off BTC and buying BCH may be one of the most ill-fated decisions ! Why would you sell off Gold in exchange for yellow plastic ? https://t.co/6Utm4ZonTm
— George Kikvadze ⚡ (@BitfuryGeorge) August 12, 2018
Then, earlier today, “Samson Mow” sent out the following two tweets to question Bitmain’s decision not to reveal Q2 numbers to the pre-IPO investors:
Why is Bitmain raising capital so fast & only showing Q1 results to pre-IPO investors? We're well into Q3 now. The reason is Q2 was a disaster. Bitmain is sitting on a massive $1.24 billion USD in inventory & S9 prices dropped by ~85%! Q2 losses range in the $600-700 millions. pic.twitter.com/fVYcDRTvBp
— Samson Mow (@Excellion) August 13, 2018
If $BTC prices stay same, Bitmain will continue bleeding as they went ALL IN ordering massive amount of wafers from TSMC. You don’t become a top 5 global customer of TSMC with smaller orders. Pre-IPO investors should push them to disclose their Q2 numbers immediately.
— Samson Mow (@Excellion) August 13, 2018
Twitter user “Parabolic Trav” (parabolictrav) suggested that Bitmain must have sold most of its BTC holding because that was their most liquid asset:
Pretty standard liquidity crunch going on with Bitmain. Suffering accelerating losses on many fronts, but cant sell illiquid assets to cover (BCH, LTC, inventory) without cratering price further and causing a death spiral. So they end up selling their only liquid asset: Bitcoin.
— Parabolic Trav (@parabolictrav) August 13, 2018
Meanwhile, Twitter user “WhalePanda” (@WhalePanda) had his own theories for Bitmain’s decision to file for an IPO:
By investing in the Bitmain IPO, you're giving them money to act as buy support for $BCH. Why now the sudden push for IPO? Since they can't support the price anymore and they realize they've made a huge mistake. pic.twitter.com/h4JzNYWdxc
— WhalePanda (@WhalePanda) August 12, 2018
There is way more competition now and with the stagnation and even losses mentioned above they need to IPO or they're doomed. Anyone buying the Bitmain IPO is basically throwing money in the dumpster fire.
This is also a great article on the dumpster fire: https://t.co/RG3dTxYT16— WhalePanda (@WhalePanda) August 13, 2018
Finally, earlier today, Twitter user “Vijay Boyapati” (@real_vijay) decided to make a series of tweets to present his thoughts on the IPO, a few of which are shown below:
8/ Bitmain is sitting on paper losses of hundreds of millions of dollars from this botched trade. But even worse, they have no ability to exit their billion dollar position in BCash without a complete collapse in its price.
— Vijay Boyapati (@real_vijay) August 13, 2018
10/ The inability to sell their BCash position is a huge problem for Bitmain because of the capital intensive nature of the business they are in. This will become particularly important as other chip manufacturers enter the mining market.
— Vijay Boyapati (@real_vijay) August 13, 2018
Featured Image Credit: Photo by “Crypto360” via Flickr; licensed under “CC BY 2.0”
