Cryptocurrency Application Specific Integrated Circuits [ASICs] have quickly grown to become one of the fastest growing markets in the cryptocurrency world. However, the biggest players in the market, such as Bitmain, Canaan, and Ebang are beginning to eye possibilities of an Initial Public Offering [IPO] to lock down some of the growth.
Many believe that the entry of these companies towards traditional share sales will determine whether their success and fortunes are backed up by value. Reportedly, these companies are at risk due to the bear market that has been seen over 2018.
Most of their growth came from the capitulation seen in the cryptocurrency market during the last two quarters of 2017. The eventual decline of price in cryptocurrencies has also seen reduced demand for mining hardware, as seen by the lackluster profits made by graphics card manufacturer Nvidia over the last quarter. This has led to an eventual slowdown in miners buying up hardware to use for mining, which has reduced in profitability both due to a higher mining difficulty and lowered prices.
Presumably, to hedge against this risk, ASIC manufacturers are moving into learning how to utilize the software to harness applications of Artificial Intelligence. Thus, the IPO would act as a “litmus test” for these companies, stated Rohit Kulkarni, a Managing Director at SharesPost.
Bloomberg provided a tentative evaluation of these companies before their IPO, considering unknowns such as the financial results of the companies, and other assets owned by them. According to their calculation, Bitmain, the industry leader in ASICs, reportedly makes around $2.5 billion annually, with a whopping estimated net worth of $4.9 billion. Other significant parties include Bitfury, with an estimated worth of about $739 million, Canaan, coming in with a valuation of $557 million, and Ebang, reportedly worth around $763 million.
Bitmain’s IPO is set to raise capital close to $3 billion, stated sources close to the company. Moreover, they also make profits from their mining farms, where they are reportedly said to control over 42% of the total hashing power of the Bitcoin [BTC] blockchain. They, along with Canaan and Ebang, have already made moves towards listing their shares to be traded at the Hong Kong Stock Exchange.
Gil Luria, the Director of Institutional Equity Research at D.A. Davidson & Co. stated:
“[The companies can] capture some of the gains they’ve made from growing the business to this point. It’s like buying shovels and Levis jeans during the gold rush. These are real companies generating a decent amount of revenue.”
He further stated that the IPOs may provide an alternative for investors and money managers who do not want to deal with holding and trading cryptocurrencies.
Bitmain and other companies are also moving into the AI space, a plus for them in multiple ways. While it also hedges against the risks of cryptocurrency markets, Chinese regulation might take an easy hand towards the offerings due to their focus on AI.
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