Nick Chong · 1 week ago · 2 min read · Insights via Grayscale Investments
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The research arm of Bitcoin Mercantile Exchange (BitMEX) recently analyzed leaked data about mining giant Bitmain to pinpoint fallacies and other investor accusations toward the mining business.
Bitmain a Potential ‘Legend’
BitMEX researchers defined Bitmain, which is valued at $8 billion ahead of its public listing in Hong Kong, a technology player with “legendary” potential, depending on how well its internal management conflicts are handled and future growth is chalked out.
The report was based on leaked data from a Twitter user, with BiMEX believing the authenticity of the documents.
As stated in the research, Bitmain’s initial public offering (IPO) documents suggest its core mining business has taken a significant hit in terms of both revenue and innovation, with 3.3 percent of its income coming from mining pools in 2018 compared to 18.4 percent in 2016.
Despite popular revenue, Bitmain is apparently facing “highly visible losses” stemming from its alleged investment in stacking huge amounts of Bitcoin Cash. BitMEX researchers place these losses at over $328 million.
However, with such negative implications aside, the research highlights that Bitmain is “like the largest and most profitable” company in the cryptocurrency ecosystem, a point which could make the IPO attractive to several Chinese investors.
Polarized Thoughts on IPO
As per the leaked data, Bitmain earned nearly $14 billion in a pre-IPO with private equity firms. Such interest makes BitMEX researchers conclude that the mining giant’s potential IPO could secure earnings of over $20 billion, an amount double that of the market cap of Bitcoin Cash.
In terms of sheer manufacturing expertise, the researchers noted that Bitmain remains the undisputed king of mining operations and equipment suppliers across the globe. The company dominates in ASIC chips manufacturing, selling over 85 percent of all cryptocurrency mining chips in use, and also owns BTC.com and Antpool, two of the world’s largest mining pools.
Speaking about the varied benefits of investing in Bitmain’s IPO, researchers noted BitMEX would not invest in the IPO, citing a myriad of issues threatening to limit the company’s future growth, such as energy-intensive operations, which make it a less scalable business than internet companies.
However, the research expressed that retail investors may think otherwise, and view Bitmain as a viable investment.
In addition, the research cautioned over-zealous investors:
“Bitmain can be a legendary crypto company, generating strong shareholder returns for decades to come, but in order to achieve this (and it’s a lot harder than it sounds) the Bitmain management team may need to improve their management of company resources.”
BitMEX further stated investment decisions in the volatile cryptocurrency landscape could be detrimental for the company’s growth, with the added emotional burden and demands of thousands of retail investors.