[IPO Spotlight] Major FIs of POSCO, Hyundai, and Shinhan All Joined... 'Bitnine' IPO Countdown Begins

[Asia Economy Reporter Park So-yeon] Bitnine will open its IPO subscription for general and institutional investors on the 1st and 2nd of next month. Bitnine plans to raise a total of 2,071,000 shares, all newly issued. The expected offering price per share is 8,700 KRW, and the anticipated market capitalization after listing is approximately 100 billion KRW. Bitnine is gaining attention as a technology growth company with equity investments from major corporate investment subsidiaries such as POSCO and Hyundai Group, as well as leading financial institutions.

◇Bitnine, a loss-making company for the past 3 years, pursues 'Tesla-style' listing

Bitnine provides graph database analysis solutions to global companies like Intel and major domestic conglomerates and public institutions. Its main product is 'AgensGraph,' launched in 2017. Overseas clients include Intel and Verizon in the United States. Last year, it was also selected for the Apache Foundation project in the U.S.

Bitnine’s core technology, graph DB, refers to a data storage format using points (nodes) and lines (edges). Storing data in graph DB form allows for more intuitive visualization of relationships between data and enables more efficient data analysis. Bitnine is the only company in Korea that develops and sells graph DB software. The company was founded in 2014 by CEO Kang Cheol-soon, who previously served as deputy general manager of IBM Global Services after working at LG CNS.

Bitnine’s financial structure has been weak. It has been a loss-making company for the past three years. From 2018 to 2020, it recorded operating losses ranging from 700 million KRW to 4.8 billion KRW annually. During the same period, net losses were between 9.6 billion KRW and 10 billion KRW. It was in a state of complete capital erosion during that time but recovered to a current ratio of 317.6% and a debt ratio of 46.01% as of the end of the first half of this year. Capital was strengthened through a paid-in capital increase this year, improving its debt reliance to 22.17%. In the first half of this year, it posted operating revenue of 8.2 billion KRW and operating profit of 800 million KRW, representing an 82% growth and a return to profitability compared to the same period last year.

Accordingly, Bitnine is pursuing a technology-special listing based on its technological competitiveness rather than existing performance. The technology-special listing system allows pre-IPO companies with technological competitiveness to proceed with an IPO even if their business performance is somewhat poor. For a smooth listing, the company must receive a technology rating of A or BBB or higher from two evaluation agencies designated by the Korea Exchange. Bitnine’s DB analysis technology and cloud graph service received A-grade or higher from two evaluation agencies in December last year.

Credit rating agency eCredible evaluated, "Bitnine provides services across various industries including public, manufacturing, finance, healthcare, education, security, and ICT through extensive experience in building graph databases domestically and internationally," adding, "It possesses both graph database technology and analysis technology, making it highly likely to continuously expand its market position both domestically and overseas."

◇Bitnine, highlighted by major investors, has 41.86% freely tradable shares... caution advised due to 1-month lock-up period

Bitnine has actively attracted external investment whenever funds were needed for growth, with major national financial institutions such as the Korea Development Bank, Korea Technology Finance Corporation, and IBK Industrial Bank of Korea participating as investors. POSCO Technology Investment, Shinhan Venture Investment, Hyundai Investment Partners, Daeduk Venture Partners, and Korea Asset Investment Securities also invested tens of billions of KRW through funds they manage. The lead underwriter, Hana Financial Investment, also invested 1 billion KRW last year to acquire a minority stake. About ten investors effectively completed preparations for investment recovery by converting all mezzanine securities held in March into common shares.

The shareholder structure shows CEO Kang Cheol-soon as the largest shareholder with 28.94%. Following are Korea Development Bank (5.92%), Korea Technology Finance Corporation (4.56%), Neoplux Technology Valuation Investment Association (4.56%), Seoul Investment Growth Industry Venture Association (4.56%), POSCO 4th Industrial Revolution Fund (3.91%), Growth Ladder POSCO K-Growth Global Fund (3.91%), Small and Medium Business Corporation (3.34%), Hyundai Investment Partners No.1 Venture Investment Association (2.61%), and Industrial Bank of Korea (2.61%), with financial investors (FIs) holding about 49% of shares. The total lock-up shares amount to 58.14%, and freely tradable shares are 41.86%. Caution is advised because most of the FI-held shares, excluding those held by the largest shareholder and related parties, have a short lock-up period of only one month.

◇Bitnine’s future growth potential 'competitiveness ↑'

Bitnine’s main markets consist of graph DB, graph analysis, and knowledge graph markets, which are expected to grow from 3.893 billion USD (approximately 4.5 trillion KRW) in 2021 to 8.835 billion USD (approximately 10.6 trillion KRW) by 2025, at an average annual growth rate of 23.6%.

Bitnine has increased its recognition by supplying graph DB for efficient construction and management of Intel’s data centers and by licensing graph database products and providing specialized graph technology consulting services to countries in the U.S. and Europe.

Bitnine has a track record of providing graph analysis services such as predictive analytics and anomaly transaction detection based on graph analysis technology, as well as AI-integrated analysis services to companies like LS Cable & System Ltd. Graph DB is still in its introductory phase domestically, representing an early market, but Bitnine executed various graph DB projects last year including with Samsung SDI and secured projects this year as well. It also carried out system failure analysis for KEPCO KDN, data center management for Intel, and housing policy analysis system construction for LH Corporation.

Credit rating agency NICE ENB evaluated, "Demand for domestic graph DB-related projects is expected to continue at a certain level, and Bitnine is a company with a high level of technological capability that is unlikely to be significantly affected by future environmental changes."

Credit rating agency eCredible stated, "Bitnine’s competitors in graph DB solutions overseas include Neo4j, ArangoDB, TigerGraph, and DataStax, while there are no competing companies domestically."