Bitcoin Mining Giant Bitmain Just Officially Filed for Its IPO

Published on Wednesday, Bitmain's long-awaited initial public offering (IPO) prospectus follows various news reports that the mining giant has been mulling a Hong Kong listing and weighing a multi-billion dollar public fundraising. The process has not been without its share of controversy, with major firms denying their role in a pre-IPO funding phase in a development that cast doubt on Bitmain's claims.

As the application is still in draft form and pending further listing hearings from the HKEX, it remains unclear how much the firm will be valued at eventually. As shown in the posted application, a number of details remain redacted, including the numbers of shares that will be offered and the timetable for the public offering.

Still, the prospectus gives notable insight into Bitmain's financial standing as well as details about the company's structure and inner workings.

Based on the application, the firm made a total of $2,517,719,000 in revenue just in 2017, representing a significant increase from the $277,612,000 in revenue it generated over the course of 2016. As of June 30 of this year, according to the prospectus, Bitmain has made $2,845,467,000 in revenue.

Further, Bitmain brought home a gross profit of $1,212,750,000 last year, according to the prospectus, again signaling a major increase from $151,351,000 over the previous year. Bitmain reported a gross profit of $1,030,151,000 for the first half of 2018.

Before taxes, Bitmain brought in $137,750,000 in 2016, $897,376,000 in 2017 and $907,792,000 for the first half of 2018.

CoinDesk previously reported that Bitmain's profits over the past years surged significantly year-on-year, which jumped from $100 million in 2016 to $1.1 billion in 2017, and another $1.1 billion just in 2018 Q1, based on documents obtained by CoinDesk.

The prospectus states that, for adjusted net profit, Bitmain accrued $48.6 million in 2015, $113.5 million in 2016, $952.5 million in 2017 and $952.1 million as of the second half of 2018.

According to the prospectus, Bitmain reported a balance of cryptocurrencies – denominated in bitcoin, bitcoin cash, ether, litecoin and dash – of $886.9 million as of June 30, 2018. This accounted for 28 percent of its total assets at the time, the document stated. This balance represents a slight increase from December 30, 2017's $872.6 million (30 percent of assets) and a significant boost from the balance of $56.3 million it said it had as of December 30, 2016.

Hardware sales boom

The application further breaks down those revenue figures by specific business line.

For example, Bitmain saw a major boost to its hardware-related sales between 2015 and the first half of this year. In 2015, Bitmain generated roughly $107.8 million in revenue. For the first half of 2018, Bitmain made about $2.6 billion, marking an increase over 2017's $2.26 billion.

The number of actual hardware products sold also rose in line with the revenue. Bitmain sold 230,000 miners in 2015, 260,000 miners in 2016, 1.62 million miners in 2017 and, as of the second quarter of 2018, 2.56 million miners.

Notably, for 2017, 27 percent of the funds it received for mining products came in the form of cryptocurrency.

The prospectus also shows the diversification of the mining products Bitmain sells. For example, in 2015, all of its hardware was geared toward bitcoin. By the first half of this year, 73.2 percent of its miners sold could be used to mine either bitcoin or bitcoin cash (this figure dipped below 70 percent for 2017).

Still, on the hardware side, it's not all rosy for Bitmain.

The company wrote that because it anticipated a "strong market growth for cryptocurrency mining hardware" moving into 2018, Bitmain placed a large order for new hardware from its production partners. Now, according to the firm, "the sales of our mining hardware slowed down, which in turn caused an increase in our inventories level and a decrease in advances received from our customers in the first half of 2018."

Land grab

According to the prospectus, Bitmain has been scooping up some of the parcels of land on which it mines cryptocurrencies.

At two sites in Inner Mongolia, Bitmain said it owns 31,045 square meters and 45,345 square meters, respectively. In Ningxia and Sichuan, Bitmain said it owns 33,335 square meters and 9,338 square meters, respectively.

In terms of leasing, Bitmain wrote that it has leased 15,200 square meters of land across five locations. More notably, Bitmain is leasing 50 properties totaling 99,700 square meters, according to the document.

Bitmain is planning to launch additional sites, according to the prospectus. The company said it has selected sites in the U.S. states of Washington, Tennessee and Texas, as well as in the Canadian province of Quebec. Construction is said to be underway and the sites are expected to go live in the first quarter of 2019.

Beyond actual mining sites, Bitmain said that it maintains additional spaces, including offices and warehouses, in Hong Kong, the U.S., Canada, Brazil, Georgia, Israel, Kyrgyzstan, Malaysia, the Netherlands, Russia, Singapore and Switzerland.

More details

Beyond the revenue figures, Bitmain's prospectus also includes a range of information about both the company itself as well as the IPO process.

For example: as of the first half of 2018, Bitmain employed 2,594 people. Of those, 840 are dedicated to research, 701 for product management, 535 for mining farm maintenance and management, 235 for administration, 209 for customers service and 74 for sales and marketing.

The prospectus also highlights the companies that worked on the IPO deal or provided advisory services to Bitmain. The document lists them as China International Capital Corporation Hong Kong Securities Limited (the offering's sole sponsor) as well as Commerce and Finance Law Offices, Maples and Calder (Hong Kong) LLP, KPMG, and Frost & Sullivan, serving as lawyers, auditors and consultants, respectively.

"As of the Latest Practicable Date, none of the experts named above has any shareholding in any member of our Group or the right (whether legally enforceable or not) to subscribe for, or to nominate persons to subscribe for securities, in any member of our Group," the prospectus adds.

Information about the companies that Bitmain has invested in was also featured in the prospectus. The company owns a 3 percent stake in Opera, having invested $50 million in the firm Opera Limited. Global Digital Mercantile Ltd., a firm described as a "crypto finance" company, received $1 million from Bitmain for a 5 percent stake.