Bitcoin

In China, Bitmain Looks Toward $1B In Funding Amid Crypto Slide

The headlines swirl around China and cryptos and a crackdown on trading, and even discussing them on social media.

But a sanguine attitude seems to prevail, for at least one notable player in the bitcoin and digital currency space.

Financial Times reported on Wednesday (Sept. 5) that the country’s largest bitcoin mining company, Bitmain Technologies, seeks to raise as much as $1 billion in private, pre-IPO funding.

That search for funding comes even as the firm navigates a cryptocurrency realm that is starkly different from the one seen just months ago, when prices were leagues higher than they are now. The steep decline in bitcoin, notably, has hurt demand for the mining technology that is offered by Bitmain, and brought down prices for the equipment that it does sell.

The firm is a marquee name amid the production, or mining, of bitcoin. As Financial Times notes, Bitmain has a role in mining more than half of the world’s bitcoin supply.

Amid rumors of the private funding, Bitmain is also said to be in the midst of mulling an initial public offering (IPO), with a valuation range between $30 billion to $40 billion within three years. The paper reported that the current valuation, per a presentation to investors quoted by FT, stands at $14 billion, compared to revenues of $2.5 billion “and net profit of nearly half that amount.”

In another notable metric, the top line stood at $1.9 billion for the first quarter of this year. But might a cautionary note be sounded? Consider the fact that 90 percent of revenues are tied to the sale of hardware that in turn is used to mine bitcoin. The pricing for those computers is also waning in the wake of the bitcoin pricing slump that has taken its toll – at this writing, the cryptocurrency changed hands at about $6,980, down from a peak late last year of $19,343.

Bitmain would not be the first mining equipment maker to come to market. The second largest firm in the space, Canaan Creative, which allegedly has just under 20 percent share of that industry, has filed to list in Hong Kong.

How far have prices come down for bitcoin mining computers? In one anecdote, FT reported that hardware that had sold for as much as 30,000 to 40,000 Chinese RMB now sells for about 10 percent of those amounts.

Further, Nvidia said last month that it had logged about $18 million in sales from crypto-focused chips and other offerings, which pales in comparison to the $100 million that had been expected.

Bitmain itself may be directly exposed to the vagaries of cryptocurrencies, as it owns about $1.2 billion of digital coins.

FT noted that the fundraising for Bitmain has seen some volatility. Unnamed investors with insight into the process have said that pricing and allocations have been marked by that volatility.

“Everyone has an angle,” said an unnamed source. “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.”

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