Chinese mining giants file for IPO

The second quarter of 2019 marked the end of the “crypto winter,” and saw bitcoin rally by over 300 percent from around $4,000 in early April to over $12,000 by the end of June. After a difficult 2018, bitcoin was finally back.

Meanwhile, unpredictable Chinese officials have quietly removed cryptocurrency mining from a list of industries that Beijing plans to outlaw. The New York Times reported that in April, crypto mining appeared on a list of industries that would be denied benefits and subsidies from local governments.

But on a final list released on Wednesday, crypto mining had been removed, meaning miners can continue to utilize China’s cheap power to run their rigs.

Now, two Chinese bitcoin mining giants – Bitmain and Canaan – want to capitalize by taking the companies public.

Bitmain wants to go public in the U.S.

A leading digital currency mining hardware manufacturer and mining pool operator, Bitmain has filed for an IPO with the US Securities and Exchange Commission (SEC), according to a report by Tencent News. Deutsche Bank is said to be the sponsor for the initial public offering.

The Beijing-based mining hardware producer reportedly plans to raise $300 to $500 million through its share sale in the US, which is a substantially lower amount than the $3 billion valuations that were targeted for the company’s initial attempt at going public on the Hong Kong Stock Exchange.

Bitmain is attempting to go public despite the boardroom drama that is currently taking place.

Co-founder and executive director Micree Zhan was unexpectedly ousted from the company at the end of October, which was made known via a leaked internal email sent by co-founder and chairman of the board, Jihan Wu. Zhan reportedly responded a week later, stating that he was removed without consent and that he would be taking legal action to regain control of the company if necessary.

It is unclear how the company was able to dismiss Zhan, given that he is a major shareholder in Bitmain. A legal battle could ensue should the company’s co-founders – Jihan Wu and Micree Zhan – not manage to settle their differences.

Bitmain’s renewed IPO ambitions follow the company’s recent release of the new Antminer 17 mining hardware series and the establishment of a new mining facility in the US.

On October 9, Bitmain co-founder Jihan Wu announced the new Antminer S17+ and T17+ at the World Digital Mining Summit (WDMS) in Frankfurt. As with all iterations of Bitmain’s mining machines, the new ASICS miners are packed with improvements to power hashrate and mining efficiency.

Two weeks later, Bitmain announced that it has built a 50MW mining farm in Rockdale, Texas, with the intention of expanding it to a 300MW facility. That would make it the largest digital currency mining facility in the world, according to a company press release.

While the crypto asset market is currently relatively stable and the momentum is positive, Bitmain’s IPO will likely struggle to get off its feet if the company does not resolve the turmoil in its boardroom.

Bitmain competitor Canaan also files for U.S. IPO

Beijing-based Canaan Creative is another cryptocurrency mining shop manufacturer and arguably Bitmain’s biggest competitor. According to a report by Bloomberg, Canaan has filed for a US initial public offering with the intention of raising $400 million (although this figure is subject to change).

Interestingly, like Bitmain, Canaan also tried to list its shares on the Hong Kong Stock Exchange but was unsuccessful. At the time, the company planned to raise $1 billion but regulators and the exchange considered crypto company IPOs “premature,” according to local media. Canaan also failed to list its shares in mainland China in a prior attempt to go public.

Today, the picture is looking much better for the Beijing-based mining hardware manufacturer. In an updated IPO filing, the company reported a Q3/2019 profit of $13 million and $95 million in revenues, which represents a 40 percent year-on-year growth for the quarter. In the first three quarters of 2019, Canaan generated $132 million in revenues and netted a loss of $31.2 million due to losses made in H1/2019.

The Canaan IPO is being led by Credit Suisse, Citigroup, China Renaissance, and CMB International Capital, and the company is planning to list its stock on Nasdaq in New York. The company’s stock ticker will be CAN.

Will we witness a wave of Bitcoin IPOs in 2020?

If Bitmain and Canaan manage to pull off successful IPOs in the US, it will be interesting to see whether or not other market-leading bitcoin companies will follow suit.

According to a report by research company Hurun, there are currently eleven blockchain startup unicorns, including Binance, Coinbase, and Ripple. Should the price of bitcoin (BTC) continue its upward momentum in the coming year, it could provide the perfect opportunity for these companies to raise capital in the equity markets, provided we do not see a market correction in stocks.

While there are already a handful of publicly-traded cryptocurrency companies, such as HIVE Blockchain Technologies and Northern Bitcoin, we are yet to witness a bitcoin unicorn list its shares on the stock exchange.

The largely venture capital-backed blockchain industry may have the opportunity to “cash-out” via public share offerings in the coming year should the right market conditions – arise. A scenario that startup founders and investors would welcome.