
TL;DR Wu’s strategy could kill the half-billion-dollar fundraiser.
Bitmain is the world’s largest player in the crypto mining hardware sector, responsible for 75% of the market. It’s a huge, centralised player, with a chequered history, and a source of anger, ridicule and bewilderment in the crypto world.
In 2018 Bitmain failed in its attempt to IPO on the Hong Kong Stock Exchange. The company had been a raging bull in the crypto bubble, and was seeking $3 billion. But it wasn’t to be; undermined by poor results, its profitability smashed by the crypto bear market, the plug was pulled. What had once seemed like a golden goose was suddenly a lame duck. The situation wasn’t helped by the lack of transparency; the falling revenues and quarterly losses were rumoured long before they were made public. Add to that the controversial figure of Jihan Wu, his former links and acrimonious split from Craig Wright, and the BCash/BSV debacle — and you have a recipe for a thoroughly toxic situation. Why would anyone want to touch Bitmain after that?
But 2019 has proven a game-changer. Bitcoin prices have risen again, Bitmain has retained its supremacy, and the IPO is once again on the cards. ‘Sources’ suggest that the IPO application will be sponsored by Deutsche Bank, and that Bitmain will be looking to raise between $300 and $500 million. Hardly the billions it was looking for last time, but still — a healthy amount.
There’s been plenty in the news about the ‘coup’ by Jihan Wu, who pushed out his co-founder Micree Zhan only a day after the IPO filing. Wu had stepped aside after the 2018 IPO failed, only to come back in now and clean house. By all accounts he is a ruthless master, and his unpleasantness has frequently publicly played out on Twitter. Reports suggest that he has banned employees from communicating with Zhan, with strict penalties for violations of his law.
So what will happen this time?
The fact that Bitmain is seeking just a tenth of the 2018 IPO amount should be a wake-up call. Things have changed, a lot. The bubble burst for Bitmain as well as bitcoin — and for IPOs in general. Investors are wary after what happened to other major tech companies, the most recent being WeWork. The appetite for risk isn’t there any more. But there are even more serious problems, and Wu is top amongst them.
As Dovey Wan, founder of Primitive Crypto and well-known crypto analyst has remarked, the very public falling-out between Wu and Zhan will likely be a deal-breaker. It invites a lawsuit that could tie the company up for months or longer. And it looks bad, very bad. How can you trust either of these people to run a company profitably? On top of the bleak picture for tech IPOs, Wu’s actions may have made Bitmain toxic to investors.
In seizing control of Bitmain to position it for IPO, Wu may have killed all hope of succeeding in his already scaled-back plans. He is captain of his ship but why would anyone want to sail with him?
Article by Moonhub
