Crypto IPO Season: Race to Secure an Offering Heats Up

The buildup to the 2017 peak in cryptocurrency prices intoxicated business owners and investors around the world. The momentum was so great that new businesses popped up every second of the day, all hoping to cash in on the first great crypto gold rush.

As 2018 rolled round, the long crypto winter soon froze out the hopes of many. Although the long trough proved too much for some, when prices rose again, the landscape looked very different. Initial coin offerings had largely been declared irrelevant and stablecoins from massive international companies gradually came to dominate a once-diverse industry.

As 2019 staggers into its final stages, crypto prices are volatile but a marked improvement over 2018. With Bitcoin surging over $10,000 on several occasions, the global climate for cryptocurrency projects is improving. China is softening its hardline stance on cryptocurrency and mining, while Blockstack carried out the first token sale approved by the United States Securities and Exchange Commission.

As the industry regains momentum, companies are once again starting to build enough confidence to aim for public listings on stock exchanges around the world. Cointelegraph looks at some upcoming initial public offerings.

SoftBank’s next bet sets its sights on the Nasdaq

SoftBank is a name synonymous with investment. Unfortunately for the Tokyo-headquartered holding company, two of its most famous investments have been far from successful. Most recently, SoftBank had to dish out a rescue package to the property company WeWork after its disastrous IPO bid fell apart. The company’s other investment, Uber, has seen a 40% drop in share price since the ride-hailing app went public in May of this year.

Nonetheless, another of SoftBank’s investments is gearing up to go public in the U.S. The blockchain and AI fintech arm of the Chinese insurance titan Ping An, OneConnect, filed for a $100 million IPO with the U.S. SEC. The firm is aiming to list on either the Nasdaq Global Market or New York Stock Exchange if its application is approved.

Like many other Chinese crypto-related companies, OneConnect has previously considered a listing on the Stock Exchange of Hong Kong, with one source claiming that the firm sought to raise up to $1 billion.

Regulators have been known to take umbrage with poor financial results from applying companies. OneConnect’s IPO filing to the SEC reveals that the company reported at net loss of $147 million on a revenue of $218 million as of Sept. 30, which places doubt on the success of the filing.

Silvergate takes gold

Silvergate Bank has long been a favorite for crypto enthusiasts. The bank, which went public on the New York Stock Exchange on Nov. 7, is famous for its pro-crypto stance. The public listing marks a milestone on the road toward greater integration between cryptocurrency and wider mainstream finance.

Related: What Are Crypto Banks and How Do They Work?

The bank is notable for its Silvergate Exchange Network, or SEN, a system of crypto exchanges and investors that facilitates the transactions of U.S. dollars between members, 24 hours a day, 365 days a year. The network had a high-profile boost after the Winklevoss-founded crypto exchange Gemini joined in August 2019.

According to a filing made by Silvergate to the SEC, the SEN registered $10.5 billion in transfers for the three months ending on Sept. 30. Total transfers under the purview of the SEC in the same period reached $23.1 billion, with total fiat transfers including wires coming in reported to be at $41.5 billion. The 2019 volumes represent a significant improvement on the figures from a year ago, amounting to $4.4 billion transfers in U.S. dollars in 2018.

The company announced that it would price its IPO consisting of 3,333,333 shares of its Class A common stock at $12.00 per share on Nov. 6. Since the second quarter of 2019, the company reported an increase in crypto-related clients, from 655 as at June 30 to 756 on Sept. 30. Live trading began on Nov. 7 at $12.75, jumping 6.2% over its IPO price of $12.

Mining giants look to hit new seam of investors

While the “Big Four” of tech may now take up most of the headlines in crypto news, before the crypto winter, the same role largely taken up by mining companies. In particular, a position occupied in the tussle between the two titans of mining, Bitmain and Canaan Creative.

The two companies played a central role in transforming the industry from a niche hobby for crypto enthusiasts to a multibillion dollar one. The IPOs of the two mining companies not only represents an important opportunity to assess the democracy that so many commentators in the crypto world believe is inherent to the technology, but also a litmus test for the industry as a whole.

Related: Regulatory Overview of Crypto Mining in Different Countries

It’s not surprising that mining companies are looking to go public now. With both Canaan and Bitmain based primarily in China, the government crackdown on both crypto and mining, and with the vertiginous plunge in prices proving to be a highly damaging combination.

However, with the thaw of both the crypto winter and the Chinese government’s frosty approach to crypto-related business, it appears the two companies want to strike while the iron is still red hot.

Ramak J. Sedigh, CEO of Plouton Mining, told Cointelegraph that while both mining giants will have to make some fundamental changes in order to meet industry standards, a successful listing would be a huge step forward for cryptocurrency as a whole:

“Bitmain and Canaan will need to make deep adjustments to their corporate culture. Neither firm is known for its transparency or post-industrial style corporate governance. Regardless, the industry is watching and cheering for them to succeed."

Canaan needs to get creative to convince regulators about its results

Although it has long-played second fiddle to Bitmain in terms of its market share, Canaan Creative appears to be leading the charge for a public listing. Despite some shaky financial results, the company initially announced that it would aim to raise $400 million, according to an IPO filed with the SEC on Oct. 28. However, prominent Crypto Twitter commentator and founding partner of Primitive Crypto, Dovey Wan, tweeted that Canaan updated its IPO file, slashing the expected fundraising total to $100 million.

As previously reported by Cointelegraph, the firm reportedly filed a $200 million IPO request with regulators in July. While Canaan might well be the first to go public, it has some skeletons in its closet that could spook investors. Perhaps the most noteworthy is that this will be the third IPO attempt for the mining firm.

Canaan was an early, albeit unsuccessful, adopter of a tactic now seeing increased usage among crypto-related companies: The reverse IPO. Regulators are often rightly suspicious of cryptocurrency companies, and buying already listed companies is seen as a way of sidestepping the fanfare of a direct public offering.

Only last year, Canaan went for a second IPO attempt. This time, the company targeted the Hong Kong stock exchange. Despite the hype that surrounded the announcement, regulators were less than impressed with Canaan’s business model, and the listing was ultimately unsuccessful.

The date for Canaan’s IPO is unspecified, but as time rolls on toward the firm’s third attempt, all eyes are on the company’s results. Having been the primary reason for the previous failures, the company has been more transparent in giving an accurate portrayal of its finances. In its amendment submitted to the SEC as part of the IPO registration process, Canaan reported a net profit of $13 million for the third quarter this year.

The company’s 2019 revenue for the first three quarters of the year was just over $134 million, but a slow start to the financial year resulted in a net loss of around $31 million. The company will have its work cut out to convince both regulators and investors alike, considering its 2018 full year net profits amounted to just over $17 million.

Bitmain charges toward IPO despite division

Bitmain has long cast a shadow over the cryptocurrency industry. Its 75% market share of BTC mining gives it enormous influence over both the market and technological innovation.

Regardless of its gargantuan size, Bitmain has struggled financially since the crypto winter and even at the start of this year. Many once-promising companies have boasted huge valuations prior to going public. Bitmain is one of them, announcing a valuation of several billion prior to its failed 2018 IPO on the Hong Kong stock exchange. Regulators were rightly cautious about the company’s secretive financials and the Hong Kong IPO application was allowed to expire.

Nonetheless, the firm discreetly filed an IPO application with the SEC in June. According to a Bloomberg report, the amount raised could be between $300 million to $500 million. The IPO bid comes at a fragile time for the company, with co-founder Micree Zhan ousted from the company in a brutal coup led by co-founder Jihan Wu, allegedly without stakeholder consent.

Related: Bitmain’s New IPO Attempt in Jeopardy as In-Fighting Goes Public

Although the climate for crypto-related companies in China is improving, Bitmain will still have to answer some uncomfortable questions about its profitability, with Wu admitting to employees in a company-wide email that times had been hard for the company since the crypto winter of 2018.

INX

Silvergate, Bitmain and Canaan are all established names in cryptocurrency and beyond. But IPOs are not confined to the industry’s titans. Gibraltar-registered blockchain and institutional crypto trading startup INX Limited announced that it is aiming to raise between $5 million and $130 million, according to its document filed with the SEC.

In the last two years, ICOs have earned themselves a poor reputation, with an estimated 80% of ICOs in 2018 alone being reported as fraudulent. As tales of fraud and exit scams have abounded, so have the respective crackdowns from the regulatory bodies across the globe.

Registering with the SEC, an authority seen across the world as the benchmark for regulatory approval, signals a desire from INX to distance itself from the mass of unregistered ICOs abounding online.

In an apparent bid to further reassure investors, INX wrote in the filing that it will not complete the sale of any of its native INX tokens until it raises gross offerings of $5 million within one year. The firm is also planning to establish a security token, along with two trading platforms managed by wholly owned subsidiaries.