An article published in the South China Morning Post indicates that things might not be all that smooth for the Bitmain IPO as they initially appeared to be. The Hong Kong regulator as well as the stock market operator have raised concerns over allowing a cryptocurrency-related business to raise funds without proper regulations.
Sources familiar with the matter have told the newspaper (in exchange for anonymity) that cryptocurrency businesses, or businesses related to cryptocurrencies such as Bitmain, are still ‘premature’ to enter the markets in the lack of a proper regulation surrounding such businesses. Hence, it is unlikely that the IPO would get a greenlight from the regulatory authorities of the Hong Kong Stock Exchange (HKEX).
Considering that the Hong Kong regulator and stock market operator are both against the idea of a cryptocurrency related business entering the HKEX, their advice to the exchange’s listing committee, which is the final authority on this, could prove to be decisive. As per Hong Kong’s listing rules, a closed-door hearing takes place before the listing committee, where the final decision to list or reject an IPO is taken by the committee. However, if the committee does not approve it in six months, the application lapses. Bitmain has filed an application looking forward to raise up to $3 Billion USD in an Initial Public Offering (IPO), which will lapse on the 26th of March, 2019.
A representative of the Hong Kong Stock Exchange stated that she cannot speak about individual cases. Bitmain has declined to comment on this issue, and so has China International Capital Corporation (CICC), which has sponsored Bitmain’s application. The Bitmain IPO was one of the most ambitious endeavours in the crypto community, which in itself is at a nascent stage right now.
Considering that the demand for cryptocurrency mining equipment is on a constant decline, if the Bitmain IPO does get approved, it would be a big boost in the morale as well as for the finances of the firm. While Bitmain holds 80% of the cryptocurrency mining equipments markets, it is beginning to feel the effects of the market slowdown - having to shut down their Israel office earlier this month. People in China have begun to sell their crypto mining equipments by the kilogram as they have been rendered useless following the market crash as expenses have surpassed the income.
Bitmain, which started off in 2013, has been largely successful. Holding a dominating percentage of the mining equipments markets, the company is also working towards the world of Artificial Intelligence. Bitmain holds a large number of cryptocurrency assets, but 94% of the revenue of the firm comes via their mining equipments business. However, the Hong Kong regulator puts all crypto-related businesses under the broad umbrella of alternative assets.
Bitmain’s IPO has seemingly hit a roadblock. However, it won’t be the first such firm to have faced such adversity from the regulators. The Hong Kong Stock Exchange, in the past, rejected the IPO application of Bitmain-rival Canaan Creative as well, which lapsed in November. It will be interesting to see if the Bitmain IPO passes through even after this reluctance from the administrators.