HKEX is Reluctant to Approve Bitmain IPO, Source Says

The Hong Kong Stock Exchange (HKEX), the third-largest exchange in Asia concerning market capitalization, is reportedly hesitant to approve the initial public offering (IPO) applications of Canaan Creative, Ebang and Bitmain.

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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 Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term 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 Finance Magnates reported, 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.”