Bitmain, the world’s largest provider of crypto miners as well as the largest owner of Bitcoin Cash(BCH) globally just filed an IPO application with Hong Kong Stock Exchange (HKEX) in a bid to become public.
In doing so, this Chinese mining giant raised the market value of BCH by almost 20% as reported by Forbes. This increase is mainly due to the company’s excellent financial standing in the market as well as bringing more than $700 million worth of profits during the first six months only of the year 2018.
Bitmain has continuously grown at a staggering rate. Despite such huge profits, the road ahead isn’t all smooth for the Chinese giant. Although its sales figures rose from 52% in 2016 to 64% in the first half of 2018, margins were well down from 54% in 2016 to a shocking low of 36% in first half of 2018.
These figures become more important due to the downfall in the crypto market since January this year making it crucial for Bitmain to deal with these concerns if it wants to give its IPO further momentum.
What’s more interesting is the fact that Bitmain accepts other cryptocurrencies as well as Bitcoin as a form of payment for its miners, with reportedly more than 25% purchases last year made in such form.
It’s a major accounting problem as well as its a negative net cash flow too. However, when factored with the crypto market surges it becomes positive and vice-versa when the market takes a plunge.
In another point, Bitmain held roughly $887 million in crypto in the first half itself of 2018 which is much more than the cryptocurrency stock as compared to $872 million(2017), $56 million(2016), and $12 million(2015).
In the company’s own words:
“In early 2018, we anticipated strong market growth for cryptocurrency mining hardware in 2018 due to the upward trend of cryptocurrencies price in the fourth quarter of 2017, and we placed a large number of orders with our production partners in response to the anticipated significant sales growth. However, there had been significant market volatility in the market price of cryptocurrencies in the first half of 2018. As a result of such volatility, the expected economic return from cryptocurrency mining had been adversely affected and the sales of our mining hardware slowed down, which in turn caused an increase in our inventories level and a decrease in advances received from our customers in the first half of 2018. Going forward, we will actively balance our business growth strategy, inventories and cryptocurrency asset levels to ensure a sustainable business growth and a healthy cash flow position, and we will adjust our procurement and prediction plan to maintain an appropriate liquidity level.”
Even with more than $1 billion worth extra inventory, Bitmain isn’t worried. According to its figures, Bitmain estimates having a working capital to sustain operations for another 12 months at least, including its crypto inventory and the result of IPO.
But, even with such, it clearly needs market demand to rise again to meet up with the quota or a globally hit product such as its latest mining chip which is believed to increase the efficiency of miners and offer them more power.