Bitmain Technologies, the world’s largest manufacturer of ASIC-based cryptocurrency mining hardware, recently released the prospectus on its highly anticipated initial public offering (IPO) – filed with the Stock Exchange of Hong Kong (SEHK). Soon after the prospectus was published, many crypto market watchers began to allege that Bitmain had been “tricking everyone” by hiding their poor performance in the recent months.

Bitmain’s critics pointed out that the mining giant had seemingly intentionally not broken down and reported its revenue for Q1 2018 and Q2 2018 – instead choosing to report nice-looking financial figures for H1 2018 profit and revenue.

“Designed To Mislead”

As observed by prominent crypto figure and chief information officer at Atlanta Digital Currency Fund Alistair Milne, Bitmain failed to mark down its Bitcoin Cash (BCH) holdings to its much lower current market value.

Milne went on to allege that Bitmain’s prospectus was “designed to mislead” through “very poor accounting practice.” In addition to reporting the value of their BCH holdings at cost, the company valued their BTC and Litecoin (LTC) holdings at cost – not at their significantly lower present market rates.

As covered on CryptoGlobe (on July 20th), Bitmain recorded an estimated $1.1 billion in profits for Q1 2018. Interestingly, the Beijing-based mining equipment manufacturer also revealed at that time that it was getting ready to launch an IPO – when its valuation was estimated at its highest $14 billion.

Given the approximately $2.85 billion in revenue Bitmain reported as of June 30th 2018 (H1), the $1.1 billion in Q1 2018 profits (first reported by Fortune) indicate that the company’s revenue may have dropped to $800 million in Q2 – in addition to a net loss of approximately $400 million.

“Declining Operational Efficiency”

Other commentary on TechCruch related to Bitmain’s accounting figures indicate its margins are down considerably. The firm’s gross margins in H1 2018 were at around 36% – down 12% from the previous year (2017) when they were about 48%. Also, gross margins during FY 2016 for the company were at 54%, suggesting a gradual and progressive decline in its margins.

Some crypto market observers have said that Bitmain “over-estimated” the demand for its products and this led to $1 billion in unsold product left in its inventory. This is yet another reason cited for the company’s allegedly poor performance in Q2 2018.

Moreover, other economic measures such as return-on-equity (ROE) and return-on-asset (ROA) seem to be far from stellar. ROE measures how profitable a company is based on how much equity it has, while ROA measures the profitability of a firm in terms of the total assets it owns.

Significantly, Bitmain’s ROA and ROE have both declined since last year which has resulted in a drop in its operational efficiency – which will now likely be of concern to public equity investors.