Bitmain, the world’s largest provider of crypto miners, has revealed the internal details of its business for the first time after it presented its initial public offering (IPO) prospectus with the Stock Exchange of Hong Kong on September 26th, 2018.
The company had not disclosed how much it wants to raise from its IPO. People familiar with Bitmain’s plans said to Bloomberg last month that the share sale may raise as much as $3 billion.
The virtual currency mining firm co-founded by Jihan Wu and Micree Zhan, earned more than $2.5 billion in revenue last year and $278 million in 2016. It said income for the first six months of this year exceeded $2.8 billion.
Founded in 2013, Bitmain is known for its ‘Antminer’ devices, that allows a miner to mine for Bitcoin and other cryptocurrencies, and that records for most of its revenue:
77 % in 2016
90 % in 2017
94 % in the first half of 2018
This income was produced from mining hardware sales. Other incomes are from mining pool services, mining farm services, and proprietary mining, the financial report said.
The company makes its own chip design and works with manufacturing associates who execute physical chips. Those chips are then used to power mining hardware that lets the developers (miners) earn a reward by mining Bitcoin and other cryptocurrencies.
Bitmain mentioned in the financial statement that it has over 80,000 customers from China, Asia, United States, Europe.
The company said it underwent exponential growth with $ 701 million in net profit in 2017, up from $104 million in 2016. For the first half of this year, it observed a gross profit of $743 million.
Bitmain recorded a negative net cash used in operating activities section but those become positive when factoring in the cryptocurrencies.
The company said it held $886 million in cryptocurrencies as of the end of June 30 2018, that’s increased from $872 million in 2017, $56 million in 2016 and $12 million in 2015.
The company stated, “We recorded an impairment loss of cryptocurrencies amounting to $102.7 million as a result of the fluctuation in the market price of cryptocurrencies.”
Through the first six months of 2018, it disposed of $516.5 million worth of cryptocurrencies as compared to disposal of $529 million in 2017.
The price hike of 2017-end led the company to overestimated demand and, as a result, its inventory inflated by $1 billion.
Bitmain in its financial statement described this overestimation:
“In early 2018, we anticipated strong market growth for cryptocurrency mining hardware in 2018 due to the upward trend of cryptocurrencies price in the fourth quarter of 2017, and we placed a large amount of orders with our production partners in response to the anticipated significant sales growth. However, there had been significant market volatility in the market price of cryptocurrencies in the first half of 2018. As a result of such volatility, the expected economic return from cryptocurrency mining had been adversely affected and 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.”
Despite having an extra $1 billion in inventory, Bitmain concluded that it has “Sufficient working capital required for our operations at present and for at least the next 12 months.”
Bitmain in September declared its newest mining chip, which it holds will offer more power and higher efficiency for miners. That growth coupled with the rising value of crypto i.e. what owners of Bitmain miners can earn has served the company firmly raise the price of its hardware.
Average selling price for its Bitcoin mining machines in 2015 was $463, but that surged to:
$767 in 2016
$1,231 in 2017
$1,012 in the first half of 2018.
Apart from mining, the company is also advancing AI chips, the first of which started last year, they would be used for developing cloud systems, as well as object, image, and facial recognition purposes