Hong Kong Exchange 'Hesitant' to Approve Bitmain IPO, Says Source

The Hong Kong Stock Exchange is reluctant to approve the initial public offering applications of Chinese bitcoin mining equipment manufacturers, according to a person involved in the talks.

The 2018 bear market has underscored the sharp ups and downs of the crypto space, making the exchange nervous about listing such companies, the source told CoinDesk.

"The HKEX doesn't want to be the first exchange in the world to approve this and have one die on them."

An HKEX spokesperson said the exchange does not comment on individual companies or individual listing applications.

Stepping back, the IPO process in Hong Kong starts with a company filing a draft prospectus with the HKEX. Then the exchange will begin back-and-forth talks and questions with the applicant.

Apart from basic listing requirements such as financial track records, the HKEX also focuses on "Suitability and sustainability of the business and how risky the business is for retail investors," said Ivy Wong, a partner at the law firm of Baker McKenzie in Hong Kong.

The source went on to explain the exchange is actually taking the advantage of the fact the crypto market is down right now because while it doesn't want to approve the applications, it doesn't have the grounds to reject them outright.

"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."

Bi said two common reasons for IPO delays in Hong Kong are a failure on the applicant's part to provide due diligence and disclosure to HKEX's satisfaction and market conditions where a realistic valuation is different from what existing investors want for their exit.

"These companies - Ebang, Bitmain and Canaan - want the regulatory approval and status of being a listed company. But as far as the genuine funding needs, they actually have quite a lot of money because they have made a lot in the past year," said the source familiar with the discussions.