HKEX is Reluctant to Approve Bitmain IPO, Source Says

The (HKEX), the third-largest exchange in Asia in terms of market capitalisation, is reportedly hesitant to approve the initial public offering (IPO) applications of Canaan Creative, Ebang and Bitmain.
The Chinese bitcoin mining equipment manufactures Canaan Creative, Ebang and Bitmain applied to sell shares on the HKEX in May, June and September of this year, respectively. The move from , in particular, was heralded as a breakthrough event for the nascent industry, as it was the first time a major crypto startup sought to go public.
According to an article from Coindesk, which cites an unnamed source who is involved in the talks, the exchange is reluctant to list cryptocurrency companies due to the high volatility and the bear market that has plagued the crypto space in 2018.
The source said: “The exchange is very hesitant to actually approve these bitcoin mining companies because the industry is so volatile. There’s a real risk that they could just not exist anymore in a year or two.”
“The HKEX doesn’t want to be the first exchange in the world to approve this and have one die on them,” they added.
According to Hong Kong-based lawyers familiar with the exchange’s IPO process, its reluctance to list the bitcoin mining firms is not out of character and considering the crypto bear market, understandable.
In Hong Kong, Ivy Wong, a partner at the law firm of Baker McKenzie noted: “I have seen cases where the applicants could satisfy the basic listing requirements for the three years’ track record, but did not manage to convince the HKEx that its business is sustainable, and the HKEX was reluctant to grant a listing approval.”
HKEX is not alone in its concerns
HKEX isn’t the only one concerned about Bitmain’s future. Earlier this year, as , BitMEX Research, the research unit for crypto exchange BitMEX, published a detailed report, which questioned the sustainability of Bitmain’s future.
Published back in September, the document revealed that although the company recorded a gross profit of $743 million during the first half of 2018, “Bitmain has been making large losses recently, with a net loss of US$395m in Q2 2018… with almost US$0.5 billion spent on failed chips in the last 18 months.”
Furthermore, the researchers saw the possibility of Bitmain’s future cash flows decreasing, adding that despite its dominant market position, there’s no guarantee that investors will flock to the company’s IPO.
So will HKEX approve Bitmain’s and the other mining companies’ IPO? According to the source: “If the market continues going up, the exchange may be pressured to approve the cases because how well the entire industry is doing. But because the market is down, these companies really have to justify [how] this industry is sustainable.”