No, Bitmain is Not Conducting an IPO to Dump Bitcoin Cash
Earlier this month, the world’s largest cryptocurrency conglomerate Bitmain revealed its plans to conduct an initial public offering (IPO) valued at $18 billion.
As a part of the IPO to be filed in Hong Kong, Bitmain disclosed its holdings of Bitcoin Cash (BCH), the third most valuable cryptocurrency in the global market.
According to a document obtained by Samson Mow, an executive at blockchain development company Blockstream, Bitmain held more than one million Bitcoin Cash as of August 2018, more than five percent of the circulating supply of BCH.
Subsequent to the release of the company’s finalized plans to conduct an IPO backed by Sequoia, SoftBank, and Tencent, controversy emerged in the cryptocurrency community, as a group of investors claimed that the IPO of Bitmain is really an attempt to liquidate its holdings of Bitcoin Cash.
As the biggest corporation in the cryptocurrency market, Bitmain is valued at $18 billion, with a $10 billion annual revenue. Currently, as of August 14, BCH is valued at $590, and the entire BCH holding of Bitmain is valued at around $590 million.
That is, less than 3.2 percent of the company’s valuation and less than 6 percent of Bitmain’s annual revenue. Hence, to conclusively state that the primary purpose of Bitmain’s IPO is to liquidate its holdings of Bitcoin Cash is illogical, given that it can easily liquidate that amount in the over-the-counter (OTC) market.
Researchers at Tabb Group, a research firm based in the US, estimated the OTC market to be at least two to three times larger than the size of the public cryptocurrency exchange market. The researchers explained that most large buy and sell orders of major cryptocurrencies such as Bitcoin and Ether are processed in the OTC market.
Considering the discrepancy in the size between the OTC market and the cryptocurrency exchange market, if Bitmain considered liquidating its holdings of BCH, it could have easily done so in the OTC market.
Moreover, the IPO of Bitmain involves Tencent and Softbank, two of the biggest companies in China and Japan. With a valuation of more than $500 billion, Tencent became the first company outside of the US to surpass the valuation of Facebook and break the $0.5 trillion mark.
The probability of SoftBank and Tencent leading multi-billion dollar funding rounds for Bitmain prior to its $18 billion IPO primarily to liquidate the relatively small BCH holdings of Bitmain is extremely low, and it is highly unlikely that companies in the size of SoftBank and Tencent would engage in deals that could potentially harm their public image.
Aurelius, a recognized cryptocurrency researcher, said:
“Bitmain: Sequoia invested. Tencent invested. Softbank invested. DST invested. Singapore’s GIC invested. But yes, I’m sure they are IPOing just to exit pump & dump their BCH bags. Amazing logic.”
Real Purpose of Bitmain’s IPO
Regardless of the IPO, Bitmain would have been able to secure a $18 billion market valuation with private funding rounds. Analysts have suggested that the initiation of the IPO of Bitmain marks the beginning of the company’s aggressive expansion across the blockchain sector and eventually to other rapidly growing industries like artificial intelligence (AI).
Joseph is a finance and cryptocurrency analyst. He is able to offer unique insights in todays market and future events