Bitmain made a strategic mistake, but is still a leader

Rough business decisions and a prolonged bearish market could cost the Chinese company huge losses, according to a new report from BitMEX Research, a research house that is analyzing Bitmain's initial public offering (IPO).

 Details of this IPO have not yet been disclosed, but some claim that the company could raise $18 billion in the offering, which would take Bitmain's market capitalization to $50 billion by the end of the year. However, there is also an opinion that the company will only be able to raise $3 billion during the IPO. In this case, its market capitalization would not be much different from the current one - from $14 to $15 billion.

Such forecasts come amid reports that the largest manufacturer of miners lost hundreds of millions of dollars due to a risky investment in Bitcoin Cash, the price of which has fallen by 88% from its peak. These reports were also accompanied by public denials of the information that Tencent and Softbank participated in Bitmain's latest round of funding.

According to researchers from BitMEX Research, these statements are largely true. According to the report, Bitmain lost $328 million on its BCH investment, essentially wiping out all of its first-quarter profits.

The report also found that Bitmain's last three generations of chips failed, costing the firm hundreds of thousands of dollars. Meanwhile, competitors have released miners that are ahead of the flagship Bitmain - Antminer S9 in all respects. In this regard, the company had to reduce prices for S9. To top it all off, the company's chief design officer, Yang Zuoxing, has left the company in favor of its competitors.

The report states that Bitmain's decision to pursue an initial public offering is a strategic move aimed at preventing competitors from gaining a funding advantage. Let us recall that Bitmain’s main competitors, Canaan Creative and Ebang Communitation, also announced their plans to hold an IPO. 

Despite these problems, researchers from BitMEX Research believe that it is too early to write off the company. Despite the fact that Bitmain's dominance in the Chinese market is under threat, the company is still a leader in the production of ASIC miners. In addition, a price reduction strategy can help the company, since its competitors are unlikely to be able to afford to take similar measures.. 

BitMEX Research estimates that Bitmain's current market position guarantees it will increase its market capitalization to $20 billion after the IPO. If the company led by Jihad Wu can manage this capital wisely, it will be able to establish its status as a "legendary cryptocurrency company."

The article ends with these words:

"Bitmain has the potential to become a legendary cryptocurrency company that will generate huge profits for its shareholders, but in order to achieve this, Bitmain executives will need to improve the efficiency with which corporate resources are used. Once the company goes public, every investment decision must be carefully considered".

According to ccn.com