Cryptocurrency mining giant Bitmain is reportedly filing for an IPO to raise $18 billion from public markets. That amount means that the Beijing-based company is valued somewhere between $40 billion and $50 billion, making its IPO among the largest public offerings ever. Bitman has raised $450 million from investors and was valued at $12 billion in private markets during its last funding round, which occurred in June this year. According to a Coindesk report, the offering will be underwritten by China International Capital Corporation. The listing is expected to occur on the Hong Kong Stock Exchange later this year or early next year.
How Does Bitmain Make Money?
Coindesk, which claimed to have seen filing documents for the IPO, stated that Bitmain earned a total of $2.3 billion in profits in the last three years. Last year’s skyrocketing prices in cryptocurrency markets garnered a profit of $1.1 billion for the company. It has already made that much during the first quarter of this year and has forecasted revenues of $2 billion by the end of 2018. Industry analysts have a more optimistic take on Bitmain’s prospects. In February this year, Bernstein Research estimated that Bitmain is generating profits of as much as $3 billion per year.
Bitmain is a vertically-integrated behemoth. It makes its own chips for mining rigs, which are sold to end customers. It also uses them in equipment for cryptocurrency mining farms.
Bitmain is a dominant player in the mining equipment business. According to Bloomberg, Bitmain controls as much as 80% of the market for bitcoin mining equipment. The company’s Application-Specific Integrated Circuit (ASIC) chips are the industry’s favored workhorses for cryptocurrency mining. In fact, Bitmain’s announcements regarding development of ASICs for specific cryptocurrencies are generally considered indicators that the coin’s numbers in the market will multiply in the coming months. The company also runs two of the largest bitcoin mining pools in the world. Those pools together account for somewhere between 42% and 51% of the total mining capacity for bitcoin. (See also: Who Is Jihan Wu And Does He Basically Control Bitcoin Today?)
What’s In The Future For Bitmain?
Cryptocurrency markets exert a strong influence on Bitmain’s revenues. A run up in crypto prices last year had a positive impact on Bitmain’s revenues. This is because it translates to increased demand for its machines and greater profits from its mining operations. During the surge in crypto markets last year, Bitmain increased prices for its mining machines. Conversely, a slide in prices means less demand for Bitmain’s machines and lower profitability from its mining operations.
To that extent, Bitmain is diversifying its revenue base. It announced a major foray into artificial intelligence last year with the Sophon BM1680, a chip that promises to speed up machine learning algorithms. In an interview with Bloomberg earlier this year, Wu said that as much as 40% of Bitmain’s revenue will come from AI chips in 5 years.
That is not all. Researchers have predicted that ASIC chips will be the building blocks for ASIC clouds that can “provide a glimpse into planet-scale computing’s future.” According to Michael Bedford Taylor at the University of Washington in Seattle, ASIC chips herald the next wave of distributed computing. In a paper, he outlined the concept of bespoke silicon, a customized form of silicon that leverages specialization to outperform high-volume general purpose System on Chips (SoCs) by industry giants. As a major industry player in ASIC chips, Bitmain is well-positioned to benefit from these predictions.
According to the Coindesk article, Bitmain has outlined plans to go “head-to-head” with U.S. and Chinese semiconductor giants in its investor prospectus. “In half a decade, Bitmain has captured 8% of the domestic chip design market where Huawei HiSilicon has taken 14 years to achieve 17%. At this rate, Bitmain could near or overcome Huawei HiSilicon’s local stronghold very soon,” the publication writes.
[Correction: This article, written in 2018, originally stated that the Bitmain IPO would be underwritten by ABC Capital Management, which was incorrect. China International Capital Corporation is the underwriter.]
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