Bitmain Technologies, the world’s largest maker of cryptocurrency mining hardware, has stated significantly smaller profits in its initial public offering prospectus than in documents related to earlier funding rounds.
The Beijing-based group, whose machines are responsible for mining at least half of the world’s stock of bitcoin, filed to list its shares in Hong Kong at the end of September, and is aiming to raise at least $500m at an implied valuation of not less than $18bn, according to documents seen by the Financial Times. As recently as September last year, the company was valued at just $1bn.
In its IPO prospectus, Bitmain stated 2017 net profits as $701.4m. In documents published ahead of a $422m pre-IPO funding round, just one month earlier, Bitmain said that year’s net profits were $1.1bn.
The August 2018 funding round had three investors: Crimson Ventures, HuangPu River Capital and CAS Investment Management, according to Crunchbase.
In documents circulated in Bitmain’s $400m Series B fundraising round in June of this year, which was led by Sequoia Capital China, the 2017 net profit figure was $1.25bn.
Asked about the differing numbers, Bitmain said: “Please refer to our IPO prospectus for appropriate figures.”
CICC, the bank leading Bitmain’s IPO, declined to comment. KPMG, the company’s auditor, did not respond to a request for comment.
Venture capitalists familiar with the company have vastly different opinions about the prospects for Bitmain.
One prominent backer said: “The question is whether you believe this is just a chip provider for cryptocurrencies, or has the potential to do more.
“There is a chance for them to become a serious chip player in China and broaden their AI products,” the person added. “We have confidence in their ability to evolve.”
One Beijing-based investor who is optimistic about the company but has not invested in it said: “The differing figures show that management doesn’t know how to communicate with the capital markets. It just shows that they are not sophisticated enough and maybe too aggressive.”
But other early-stage investors are more lukewarm.
“I am not a fan of the bitcoin infrastructure play,” said one venture capitalist with offices in Hong Kong and Beijing. “It is fairly speculative in nature and these machines don’t really create significant value.”
It is also unclear in the IPO prospectus how the company priced a stated holding of $886.9m of cryptocurrencies, made up of bitcoin, bitcoin Cash and Ether.
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The holding accounted for 28 per cent of Bitmain’s total assets at the end of June. Bitmain accepts payments for its hardware in cryptocurrency.
The company said it had booked this holding at cost, rather than at current market value.
David Vorick, of Siacoin, which has also raised money to manufacture cryptocurrency mining machines, said that the market value of this holding “is much lower than they bought it for”.
“Bitcoin is worth roughly one-third of its January peak,” he added.
Bitmain’s recently stated $18bn valuation represents a jump from its earlier funding rounds.
According to Crunchbase, Bitmain sold 5 per cent of its equity in its Series A funding in September last year for $50m, at the time estimated as implying a $1bn valuation. IDG Capital, Sequoia Capital China and Sinovation Ventures participated in that funding round.
The relevant documents shown to investors earlier this year ascribed a valuation of $14bn to the company, and projected that it would reach a valuation of between $30bn and $40bn within three years. CBInsights, a venture capital database, values Bitmain at $12bn.
In addition to accumulating cryptocurrencies and selling kit — the price of which has fallen alongside the fall in bitcoin — Bitmain has become an investor itself.
In May, it led a $110m investment in Circle Internet Financial that values the fast-growing US mobile payments and cryptocurrency trading company at close to $3bn.
This article has been amended to reflect the fact that Temasek is not investor in Bitmain.
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