Bitmain, a cryptocurrency mining giant, might see a class action lawsuit sometime real soon. About a year ago, they held an official IPO and raised around $700 million from investors. Now it looks like those $700 million got them out of bankruptcy. Also, a couple of days ago their application for an IPO on the Hong Kong Stock Exchange expired, meaning that no time soon we will see Bitmain trading on the HKEX.
Class action works in Honk Kong says unofficial sources
During the summer of 2018, Bitmain along with its CEO Jihan Wu, promised to their investors that the valuation of the company will grow from $12 billion to $18 billion. Bitmain justified this increase with the statistics of their previous quarters, showing that they have constantly grown. Respectively, in the first half of 2018, they profited nearly $1 billion after having made over $1 billion for all of 2017. After that, in the third quarter of 2018, Bitmain reported a loss of $500 million.
According to this, a Twitter user BTCKING555, who has been actively involved in criticizing the Bitmain IPO from the beginning, wrote that a group of investors are preparing a class action lawsuit against Bitmain. Their expectations are shattered since they were expecting a more significant growth by the company by this time.
The influence of the market, impatient investors or business management issues?
Of course, you can go on and say, “but the market hasn’t been much of a treat either”! It’s true and that could be accounted as one of the flaws of Bitmain – it just wasn’t there at the right time. However, a company of such scale like Bitmain should’ve at least warned their investors of a possible bear market period. They should’ve made a proper road map with multiple scenarios on how the market situation can escalate. No wonder HKEX didn’t list them immediately. Happened exactly what HKEX anticipated – crypto markets were too volatile. But with a valuation of $12 billion the company could’ve predicted where the markets were heading.
Also, you can say that the investors should’ve done more in-depth research of the company before actually investing. Overall, this situation sounds a little bit ridiculous from all parties point of views. The investors complain that the company hasn’t reached all-time highs, the company is barely hanging on, even though their massive profits earlier and the market is continuing to go down. I already can imagine the Bitmain officials thinking to themselves: “Just please wait one more year, and you will see your profits”, but unfortunately you cannot tell the market what to do.
On the other side, we could possibly see a bull market in the near future. That could turn the Bitmain issue around since Bitmain’s profits are closely tied with the ecosystem and price of Bitcoin.