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The crypto community has been buzzing about a potential initial public offering from Bitmain Technologies Ltd. for a few months now.
Maybe you've been doing some of that buzzing yourself.
I know that back on Aug. 14, I buzzed about it right here.
I said if Bitmain goes public, it would be one of the few blockchain pure plays on the market. And I noted how a Bitmain IPO would be a big catalyst for the whole cryptocurrency sector.
That all remains true.
But now the time for rumors and whispers is up. Bitmain's big move, which would be the crypto world's largest IPO to date, is on the record.
Last week, the Beijing-based firm officially filed to go public on the Hong Kong Stock Exchange – date to be determined.
There's a lot of potential upside here – but there are many possible pitfalls as well.
So we'll take a look at all that.
Then I'll show you a way you can play this crypto IPO to your advantage.
You're going to want to see this...
Bitmain's Bottom Line
Bitmain is one of the top developers of application-specific integrated circuits (ASICs) for crypto mining and artificial intelligence. With an 85% market share, it pretty much owns the crypto mining rig market.
It's also a large crypto miner itself, though the share of its revenue earned from mining has dropped from above 18% at the beginning of 2016 to below 4% by the first quarter of this year, according to research by crypto exchange BitMEX.
Now, Bitmain's IPO represents not just another opportunity to invest in this fast-growing technology, but also shows that the industry is maturing and going further mainstream.
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So this is exciting stuff.
But here's the thing. I've got four "howevers" to this move right now.
So slow down and check these out before chasing Bitmain's IPO...
The Big However
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"However" No. 1: We don't know much about the crypto industry's big players, including Bitmain. For instance, media reports earlier this summer claimed that Bitmain had received pre-IPO investments from heavyweight backers like Tencent Holdings Ltd. (OTC: TCEHY) and SoftBank Group Corp. (OTC: SFTBY). However, both of those Asian tech giants have since refuted those claims outright.
"However" No. 2: Bitmain's finances are iffy. Yes, during the second quarter of 2018, net profits climbed to $952.1 million, compared to about the same figure for all of 2017. And the firm was able to maintain a strong cash position thanks to infusions from investors, which have amounted to $784.7 million since August 2017, BitMEX said. But the firm has suffered write-downs of as much as $493 million since 2017, due in part to overproduction of its specialized crypto mining chips, as well as the failure of some models to take off in the market.
"However" No. 3: Bitmain has lost money on one of its key assets – its significant cryptocurrency holdings. Those stood at $886.9 million in the second quarter, compared to $1.17 billion in the first quarter. The firm apparently sold most of its Bitcoin (BTC) holdings in order to stock up on Bitcoin Cash (BCH), losing up to $300 million earlier in the summer as BCH tanked. That's according to a pre-IPO investor deck leaked by Blockstream Chief Strategy Officer Samson Mow, so that figure may be exaggerated. Yet investors should worry about this firm's stake in BCH going forward, and how it could affect profits in the future. So far this year, BCH has dropped nearly 80% in value.
"However" No. 4: We don't know how much Bitmain hopes to raise through its IPO. While the firm's IPO filing does not show the amount of money it hopes to raise, a figure of $18 billion or so had been floating around for a while.
All that said, Bitmain does have a lot going for it as the dominant player in the mining rig market and as a mining pool operator with a combined global market share of 48%.
And on the chip-making front, its recent announcement of a new, 7nm ASIC crypto mining chip could prove to be a success for the firm.
Plus, the cash infusion from an IPO could help it maintain its competitive advantage as rivals like crypto mining chip maker Canaan Creative are also filing for IPOs in Hong Kong. For its part, Canaan is hoping to raise some $1 billion, according to CoinDesk.
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Bottom line: I can't recommend any attempt to jump in on the Bitmain IPO, whenever it launches – it's just too risky right now.
But there are a couple of ways you could get in on this IPO – before it even happens...
Two Ways to Play It
Outside of diving into cryptocurrencies, blockchain technology has thus far been a tough area for everyday investors to get into. There just aren't that many options on the market.
And that's a shame when you consider that WinterGreen Research estimates the worldwide market for blockchain products was $706 million last year and could reach more than $60 billion by 2024. That's 8,400% growth in less than a decade, and that'll lead to the kinds of gains no one can ignore.
Now, the industry has been pushing the U.S. Securities and Exchange Commission (SEC) to give its stamp of approval to a cryptocurrency exchange-traded fund (ETF). That hasn't happened yet, though the situation could change by the end of the year. The SEC said it will rule on whether to approve a much-anticipated Bitcoin ETF by asset manager Van Eck Securities Corp. and blockchain company SolidX Partners Inc. by the end of the year.
Meantime, there are several blockchain-focused ETFs on the market, including the Amplify Transformational Data Sharing ETF (NYSE: BLOK).
BLOK has several attractive picks, including fintech leader Square Inc. (NYSE: SQ) and Japanese blockchain backer SBI Holdings Inc. (OTC: SBHGF).
And it meets two of the three ETF Profit Screens I use when considering such investments.
- BLOK is based on a trend that's here to stay for the foreseeable future.
- Its expense ratio, at 0.7%, is below my cap of 1%, though above my ideal figure of under 0.5%.
That said, BLOK doesn't yet have a Morningstar rating. I prefer to invest in ETFs with three or more stars. But BLOK has a lot going for it, and I think it will earn those stars once it matures some.
Then there's the First Trust US Equity Opportunities ETF Fund (NYSE: FPX), which seeks to mirror the broader market for new issues.
I think every tech investor ought to consider holding this ETF for the long haul. By doing so, you can grab the upside and excitement that IPOs offer, without all of the volatility inherent in new issues.
In other words, let the fund managers do all the heavy lifting while you sit back and watch the profits pile up.
Now we don't know if either of these ETFs will pick up Bitmain, but there's a good chance one or both will. So we'll be keeping an eye on this for you.
Of course, if you're ready to take the next step into investing in blockchain technology and cryptocurrencies, you should look at cryptocurrencies themselves, like Bitcoin.
Bitcoin, which led the broader crypto run-up late last year, as well as the decline this year, is poised to reach $100,000.
See, there's a "Lightning Fix" coming to Bitcoin that's going to allow people to use it to make small payments for everyday purchases, like picking up lunch at your local deli. With this fix, such payments will not just be possible – but also faster, cheaper, and more secure than even cash.
I've put together a world-class guide to crypto investing – and an in-depth report mapping out exactly how and why Bitcoin could reach $100,000.
To find out how to get all that – and a lot more – click here.
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The post Inside the Bitcoin Mining IPO Everyone Is Talking About appeared first on Strategic Tech Investor | Michael A. Robinson.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.