Bitmain Lowers Profit Figures in IPO Filing

Published on 13 November 2018 by Cryptovest Staff

Bitmain may not be that profitable after all, the initial public offering prospectus shows.

The profits of the China-based Bitmain Technologies group may be substantially lower than the initial estimates provided in the documents related to early-stage funding rounds, The Financial Times reports.

The upcoming IPO

Bitmain, the world’s largest manufacturer of cryptocurrency mining equipment, applied for an initial public offering on the Hong Kong Stock Exchange (HKEX) in September 2018, with the stated aim of raising as much as $18 billion. However, 2017 net profit figures provided by the company ahead of different rounds of financing differ substantially with the apparent downward trend.

The 2017 net profit figure was $1.25 billion in the documents prepared ahead of Bitmain’s $400m Series B fundraising, that was lead by Sequoia Capital China. In the August 2018 round, the profit was reduced to $1.1 billion, while in the most recent IPO prospectus, Bitmain reduced its net profits for 2017 to $701.4 million.

Dim future

While both the company’s press-service and the auditors failed to explain the discrepancies on the request submitted by the Financial Times, investors expressed divergent opinions about the profit figures and Bitmain's future in general.

“The differing figures show that management doesn’t know how to communicate with the capital markets. It just shows that they are not sophisticated enough and maybe too aggressive,” a China-based investor commented.

Most experts believe that the success of the company hinges on its ability to outgrow its current status as a chip manufacturer for cryptocurrency mining, which is regarded as a speculative business with little-to-no intrinsic value.

Cryptocurrency assets value

At the end of June, Bitmain stated that its crypto holdings made of Bitcoin, Bitcoin Cash and Ethereum were worth $886.9 million. But the industry experts, including David Vorick, of Siacoin, are skeptical about it, saying that the estimate is overly optimistic.

Along with vague profit numbers, this casts some doubt on the fairness of the company's valuation and on its perspectives to hit its fundraising targets.