Bankers eager to meet Chinese bitcoin miners

Investment bankers still have a vivid recollection of that time, about a decade ago, when mainland mining bosses descended on Hong Kong to list their companies on the local stock exchange.

The executives looked ill at ease in their suits, and their big, blackened hands –  a testament to their hard work and the long hours they spent in the coalpits – provided a stark contrast to the gold watches they were wearing.

But they were very friendly and carried a lot of cash, eager to foot the restaurant tab and impress the bankers.

Well, there’s a new generation of Chinese miners who are coming to town for the same purpose: to seek capital in the local stock market.

But these miners don’t spend their time in coal mines, but rather in front of large computers. Their business is cryptocurrencies, and they want their companies listed in Hong Kong later this year.

According to IFR, two of the world’s largest bitcoin plays plan to list on the Hong Kong Stock Exchange as soon as this year with each seeking to raise as much as US$1 billion.

Canaan Creative has applied to launch an initial public offering in the city, while Zhejiang Ebang Communication has started working with financial advisers for a listing.

The two listings would be a good test for international investors’ appetite for cryptocurrencies and the blockchain technology that underpins them.

Despite a 35 percent decline in the value of bitcoin this year, blockchain is a hot investor theme because many industries, including banks, are interested in using the technology in their business.

Canaan, which claims to supply a quarter of the world’s bitcoin blockchain computing power, reported a 361 million yuan (US$56.7 million) profit last year, up from 52.54 million in 2016, according to its IPO prospectus. Turnover in 2017 was 1.3 billion yuan, up from 316 million yuan in the previous year.

Credit Suisse, CMB International, Deutsche Bank and Morgan Stanley are joint sponsors for Canaan’s IPO.

In January, Ebang said it would seek a Hong Kong listing after it delisted from the mainland’s New Third Board.

But valuation remains a big unknown because of the highly fluctuating price of bitcoin and lack of comparison in the global market.

In Canada, HIVE Blockchain, formerly called Leeta Gold, a mineral exploration company, engaged in bitcoin mining in Iceland with a market capitalization of US$333 million. In Australia, DigitalX, which took over Macro Energy via a backdoor listing in 2014, was valued at US$82.76 million.

Investment bankers, of course, are eager to meet this new generation of miners, but they are not likely to be shaking hands with people with blackened hands and gold watches this time around.

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CG

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