Bitmain, a leading bitcoin miner, has secretly filed for an IPO that is sponsored by Deutsche Bank, a German multinational company, as reported by Tencent News. The company has been struggling to bounce back since crypto winter. The black swan event dampened demand for cryptocurrency mining machines, causing profitability to plummet. The reported secret filing with the U.S. Securities and Exchange Commission (SEC) will help raise badly needed capital. Bitmain is reportedly looking to raise between $300 million and $500 million through the fundraiser.
The company had initially sought to raise about $3 billion via the Hong Kong Stock Exchange (HKEX) but faced pushback from regulators. It has hired Zheng Hua, a former NASDAQ China representative, as a project consultant to increase the chances of approval.
Power Struggle
The top brass at Bitmain has been locked in leadership wrangles for years now. This is according to a new revealing report, which illustrates an escalation of tensions between co-founders Jihan Wu and Micree Zhan.
On Tuesday, Zhan was ousted as executive director at the company by Wu. Staff at the firm also received a bellicose statement warning them against interacting with the exiled leader.
A leaked transcript of an internal meeting shows that the company had in the past missed growth opportunities due to disagreements. According to Wu, internal divisions caused The Bank of Beijing to retract a credit offer, which could have been used to clear its books. This subsequently caused problems with suppliers.
The SEC, which is mandated to protect investor interests, will likely look at such issues in its determination.
A Few Major Hurdles Related to the IPO
The reality is that crypto companies will struggle to gain IPO approval in major jurisdictions, such as the United States and China. The latter has already blacklisted crypto companies from filing IPOs. Regulators deem it too premature for crypto-centric firms to seek one because there is no legal framework to serve as guidance.
Getting approval from the SEC seems like an insurmountable hurdle at the moment due to the level of trepidation surrounding the industry. The mill pond environment is capricious at best. Digital currency prices change all the time and are highly susceptible to manipulation. The SEC approval of an IPO connected to bitcoin, an unregulated digital commodity, is unlikely. It has, in the past, rejected bitcoin ETFs because of this factor.
The U.S.-China Trade War Threat
Since the onset of the U.S.-China trade war, the Trump administration has made a flurry of threats against Chinese tech companies in the U.S., and in September, there were rumors that the White House was looking to delist some of them from capital markets. Chinese company stocks dropped momentarily in anticipation of the move.
Although unlikely, the reports sent jitters across investment circles. At the same time, NASDAQ was reported to be tightening restrictions for small Chinese companies seeking IPO approvals.
There is speculation that the U.S. is looking to limit investments in Chinese companies this way.
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