Why an IPO can bring Bitmain more problems than bonuses
Although theoretically Bitmain must be submitted to the investors of the most successful company in the cryptocurrency market, is it reasonable to talk about its unprecedented success? We present to your attention the opinion of the editor of the site Verdict.co.uk and the author of the Forbes Billy Bambro.
Bitmain, the world’s largest manufacturer of equipment for mining, has applied to the Hong Kong stock exchange (HKSE) application for IPO. A cursory glance yearly progress this Chinese company is impressive. In 2017, the profit amounted to $2.5 billion, and in the first half of this year — $2 billion And if you look at the details?
According to the report submitted Bitmain along with the application for the IPO in the second quarter of 2018 the company’s profit decreased. To disguise the failure of the second quarter, Bitmain chose to mix the data during this period with information about the first quarter, which looks more attractive. If the total income for the first half totaled $2.8 billion, the share of the second quarter had only $800 million Rest of the profits were received in the first quarter, which saved the situation for a second.
The above figures also include data on gross profit Bitmain, which in the first half of 2018 was 36%, while in 2017 was 47%, and in 2016 — 54%.
Cost of sales of Bitmain products in the first half of 2018 has increased compared to previous periods. This indicates that the company overestimated demand for their miners. The inventory revealed unsold devices worth nearly $1 billion, which explains the difficulties the company faced in the mid of 2018, and the fact that the second quarter is worse than the previous.
Undoubtedly, the potential buyers of the stock pay attention to these details when deciding how justified investments in Bitmain.
Since 90% of the company’s profits have their source in the production of chips for mining, its business model is based on state of the market, which remains volatile. Note that Nvidia has already announced that it would stop production of chips on the background of significant decrease of demand.
It seems that Bitmain is trying to enter Hong Kong regulators and the public astray about the true state of Affairs. But it should be noted that the company plans to expand its operations by opening three mining farm in the US. Thus, Bitmain diversifitsirovat their business, not wanting to focus on the production of chips.
The unpredictability of the cryptocurrency sector may interfere with Bitmain to attract shareholders. In order to successfully move to the status of a public company, it should provide a more focused business model.