Crypto Industry Leaders: IPOs May Determine Their True Worth
Among the largest digital currency icons in the world, several major players will soon confirm their true worth to the public. For the very first time, industry leaders of three booming crypto businesses, Canaan, Bitmain and Ebang will possibly face the spotlight of public market analysis due to their pursuit of acquiring stock listings within Hong Kong. In addition, Bitfury, an equal industry giant is considering hosting an IPO however has not confirmed plans to do so.
What Will IPOs Reveal?
If these entities were to carry on, their share prices will act as a true test to whether the crypto based fortunes belonging to Jihan Wu of Bitmain, Zhang Negeng of Canaan, or Hu Dong of Ebang hold sustainable value. As each of these crypto companies benefited from peak growth rates of Bitcoin in 2017, the digital currency and those who rely on it have experienced a loss of half their worth this year. Government regulations as well as growing concerns regarding the safety of exchange platforms and greater manipulation of the market has contributed to this significant loss.
The major risk for these companies resides in the possible prolonging of bear market mentality, decreasing overall demands for customized products manufactured by these companies. Miners utilize these products, to authorize cryptocurrency transactions in order to mine additional blocks and receive their digital currency rewards. To counteract this risk, all three have attempted to branch out and apply their unique technology in various industries including A.I. development. However, none have proven scalability of these additional applications. Shares traded to the pubic could provide a true example of these companies’ prospects, and how investors view them.
Rohit Kulkarni, SharesPost’s managing director, stated that he believes these upcoming IPOs will act as a litmus test, allowing the market to analyze the true status of their worth beyond speculation.
There is very little public info offered regarding the finances of companies responsible for manufacturing crypto mining hardware or the total assets their founders own. Estimates calculating their net worth prior to the confirmation of an IPO rely significantly on estimations. Possible ranges and projections were collected from personal interviews, info available on Bloomberg, as well as filings issued by exchanges.
According to industry experts, Bitmain, one of the most dominant members of the industry, plans to schedule an IPO with the potential to gain up to $3 billion. Bitmain’s head figure, Wu, age 32, stated during his interview that himself and his co-founder, Micree Zhan, achieved a revenue of over $2 billion in 2017. He also stated that both partners owned 60% of the entire enterprise. On top of manufacturing mining hardware products the business is also in control of operating several of the largest mining pools globally. These collectives utilize the efforts of individual miners to create the largest computer processing capacity possible, of which the rewards are divided among those who participate in the pool. For now, it remains unclear as to whether these mining groups will be considered part of the IPO.
A Bitfury spokesperson noted that the business received a revenue of over $400 million within twelve months. During an interview, Valery Vavilov, the CEO of Bitfury, stated that she and Valery Nebesny, company co-founder, own the majority of Bitfury shares.
According to statistics drawn from exchange documents, Canaan inc.’s board of founders is comprised of three members, Zhang, Li Jiaxuan, and Liu Xiangfu. Each member own approximately 17% of the company's stakes whereas Hu owns the majority 68% of Ebang’s shares. Although there is no date confirmed currently, both Ebang and Canaan have officially processed applications associated with listing their shares within the Hong Kong market. In addition, both Bitfury and Bitmain outright refused to reply to questions on the matter while Ebang and Canaan have yet to provide official statements in response.
Potential Risk or Potential Growth? Crypto Tech and A.I.
As digital currency values continue to drop, the push for mining hardware manufacturers to open up to the idea of selling shares publicly could make a lot of sense, stated D.A.’s director of institutional equity research, Gil Luria. She noted that owners are most likely aiming to acquire a percentage of the massive gains they’ve achieved with their businesses thus far. With Bitcoin values stable at $6,700 the overall price has fallen 53% since 2017.
Luria went on to point out that IPOs often appeal to owners who hold bullish views regarding the crypto industry however aim to avoid risks associated with relying on purely digital currency. She described these companies as legitimate entities establishing a significant value of revenue, and that purchasing shares would equate to buying equipment you need such as shovels and jeans during the historic gold rush. An analyst for Mizuho Securities in Hong Kong, Kevin Wang, also explained that purchasing these stocks also provides potential investors with the necessary exposure needed to grow development within the A.I. sector. He noted that Bitmain’s ASICs created for miners has proven useful regarding the extreme computer processing required by several types of artificial intelligence, particularly that of machine learning.
This new found interest to pursue other sectors of the technology sector and apply their services to uses beyond crypto mining may very well be a contributor to their recent choice to move forward with IPOs as opposed to other processes such as ICOs. In addition, China has become one of the largest supporters of Artificial Intelligence development however have put a ban on Initial Coin Offerings. This creates a complex position for crypto based companies particularly those manufacturing mining hardware as ICOs have contributed to a major boom in of native tokens.
For those potentially considering investing in stocks, the competition that exists within the mining sector of the crypto industry poses an equal risk as that associated with dropping digital currency prices.