Bitmain Crypto Mining Giant IPO Application officially expired

Bitmain's application for the Initial Public Offering (IPO) on the Hong Kong Stock Exchange (HKEX) has officially ended, meaning that no such transaction will take place soon.

According to an update posted on the HKEX website, the case of Bitmain has been transferred to an "inactive" group of applications and is now considered to be obsolete, six months after the filing of the prospectus by the company on September 26th.

If he still wants to continue a list, Bitmain can re-drop the application, but the company would be required to provide additional financial records beyond what was included in its initial deposit.

According to one SEO rule of HKEX, "the last fiscal year reported by the accountants of a new applicant shall not have been completed more than six months from the date of the listing documents". However, the last Bitmain public repository only covers the period ending June 2018, almost nine months ago.

The app caught a lot of attention last fall, when Bitmain revealed impressive earnings growth in recent years. For example, just for the first half of 2018, the mining giant made a net profit of nearly $ 1 billion, after making more than $ 1 billion for 2017.

Despite such rapid growth in net income, reflecting the growing cryptocurrency market in 2017, HKEX was reluctant to approve applications from Bitmain and its mining rivals Canaan Creative and Ebang due to volatility in the sector.

In fact, along with the collapse of the market in 2018, Bitmain suffered a loss of about $ 500 million in the third quarter of last year.

It is unclear for the moment whether Bitmain is considering a new attempt at public publication in the near future. The company released an announcement on Tuesday saying:

"The application for Bitmain's registration with HKex in September 2018 has reached its 6-month expiry date. … We will revive the work of the listing application at a convenient time in the future. "

The company also confirmed in the same announcement that co-founders Jihan Wu and Micree Zhan had resigned as co-CEOs. Haichao Wang, former director of product engineering at Bitmain, was officially named managing director of Bitmain, several months after the news announced a reshuffle of management.

But if it does not find another way to publicize its company, the company could have to repay more than $ 700 million to its venture capital investors.

$ 700 million redeemable

As at June 30, 2018, Bitmain had a $ 715 million liability on its balance sheet entitled "Redeemable, Convertible and Preferred Shares" resulting from the closing of its Series A and Series B financing series over the past two years. This amount represented almost half of the company's total liabilities at the time.

According to the company's IPO prospectus, the clauses agreed between Bitmain and these investors included a buy-back clause, which gives shareholders the right to require Bitmain to redeem or redeem all or part of their actions if one or the other of these events occurs.

One of these situations is "neither qualified [[[[DELETED] no qualifying sale for the purposes of the terms has been completed by the fifth anniversary of the date of issue of the preferred shares, "the document states. The other is the occurrence of a default on the part of the company or its majority shareholders, which has a "significant adverse effect" on all of the company's activities and "has not been cured in the 30 days as defined in the conditions ".

Shirley Wang, a partner in the Baker McKenzie FenXun law firm specializing in debt capital markets, said such buyback clauses were a common and traditional way to protect investors and was not unusual for investors. investors to initiate a buy-back procedure. But the conditions under which redemption rights can be exercised vary from one transaction to another, she added.

Although the exact type of event from the pbadage in the Bitmain prospectus is unclear, an index can be found in a summary of the terms of Bitmain's B + round, in which the company raised $ 440 million.

According to a copy of this document obtained by CoinDesk, investors have the right to redeem all or part of the B + Preferred Shares at any time after the first such date:

"(I) 5 years from the date of closing (if not a qualified IPO), or (ii) in the event of a breach by a group company or one of the founding parties of the terms of the transaction documents in connection with the transactions referred to herein, which constitute a material adverse effect and are not cured. within 30 days. " [Emphasis added]

In these circumstances, Series B + investors may request that Bitmain redeem the shares for an amount equal to the purchase price, plus "all declared and unpaid dividends" and a "hypothetical annual compound return". 10% "for each year in which these shares are outstanding. closing date, less any amount received by investors.

This list of conditions also specified what a qualified IPO meant for investors in the B + series of Bitmain, stating:

"Qualified IPO is defined as a public offering to subscribe for ordinary shares of the Company at a public offer price per share (before commissions and underwriting fees) valuing the Company at least 18 billion US dollars under an offer of at least 500 million dollars). "

Although the amount that Bitmain intends to collect through the IPO is also taken from HKEx's prospectus, documents obtained by CoinDesk last summer indicated that the product would have reached $ 18 billion with a market capitalization. from 40 to 50 billion dollars.

Image of Jihan Wu, co-founder of Bitmain, via CoinDesk archives