Text | Edited by Nancy | Produced by Bi Tongtong | PANews

On the evening of June 26th, during the Dragon Boat Festival holiday, the Hangzhou Hall of the InterContinental Hotel in Hangzhou was crowded with people. Ebang International was holding a listing ceremony here. Ebang, which had failed twice on the Hong Kong Stock Exchange, finally realized its dream of being listed on the NASDAQ in the US , becoming the second mining company after Canaan Technology.

At 21:30, the mining machine manufacturer Ebang International was officially listed with the stock code "EBON" and the issue price was set at US$5.23 per share, but it opened at US$4.6, which fell below the issue price, and reached a minimum of US$4.5 after the opening.

Under the uncertainties of encrypted assets and the crisis of confidence in Chinese concept stocks triggered by Ruixing Coffee, Yibang's opening debut is really a sweat. On the same day, Shengwang, another Chinese concept stock interactive cloud service provider, was also listed on Nasdaq, but it recorded a 125% increase at the opening.

"In the future, it is more important to further improve the company's core competitiveness and profitability, accelerate the company's industrial scale to enter the international market, and obtain greater economic benefits." Hu Dong, founder of Ebang International, gave a speech at the listing ceremony express.

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The bumpy road to listing: Delisting from the New Third Board, crashing Hong Kong stocks, and switching to U.S. stocks

In 2010, Ebang International was established, mainly engaged in the development and sales of communication network access equipment, and has nothing to do with blockchain. Until 2104, the rise of the blockchain, after several years of development, Ebang International chose to transform, and began to develop, produce and sell the BPU of the blockchain processor, which is the "mining machine" we are familiar with.

Riding the wind of mining machines, Ebang International was listed on the New Third Board on August 19, 2015. In the following two years, Yibang International's revenue and net profit have been soaring all the way. In 2015, Yibang International's revenue was 92.14 million yuan, with a net profit of 24.236 million; in 2016, the revenue was 120 million yuan, and the net profit was 124 million yuan; in 2017, the revenue was 978 million yuan, and the net profit was 378 million yuan. In just three years, Ebang International's net profit has increased by 15.5 times, and its market share occupies about 11%, which also makes it firmly seated as the third largest bitcoin mining machine manufacturer in the world.

Since the liquidity of the New Third Board could no longer satisfy Ebang International, in March 2018, Ebang International was delisted from the New Third Board and moved to Hong Kong stocks. And on May 17, it was incorporated in the Cayman Islands and completed business restructuring.

However, what Ebang International did not expect was that "not meeting the core principle of the Hong Kong Stock Exchange - listing suitability (suitability)" has become a stumbling block, making its road to Hong Kong listing full of bumps. On June 24, 2018, Ebang International submitted a listing application to the Hong Kong Stock Exchange for the first time, but the application expired in December of the same year; on December 20, 2018, Ebang International submitted a listing application to the Hong Kong Stock Exchange again, but in 2019 On June 21, the information disclosed by the Hong Kong Stock Exchange showed that its prospectus became invalid again.

To add insult to injury, Ebang International, which failed to get what it wanted for its two listing applications, also had unsatisfactory performance, with year-on-year decline. In 2018, Ebang International’s revenue was US$319 million, with a net loss of US$11.8 million; in 2019, Ebang International’s revenue was US$109 million, with a net loss of US$41.1 million; in the first quarter of 2020, Ebang International’s net loss Has reached 2.5 million US dollars.

Despite the setbacks, Ebang International, which was in trouble, still did not give up its dream of going public, and then chose to seek "survival" overseas. On February 14 this year, Ebang International submitted a listing application to the US Securities and Exchange Commission (SEC) in a confidential manner, planning to list on the New York Stock Exchange or the Nasdaq Global Market, and plans to raise up to US$100 million.

Now Ebang International has successfully listed on Nasdaq, issuing 19.3236 million shares at an issue price of US$5.23. At the same time, the amount of funds to be raised increased from 86.95 million to 125 million US dollars.

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Negative turmoil continues: 4.3 billion P2P thunderstorm case and 35,000 mining machines that disappeared mysteriously

Debt collection and rights protection, litigation disputes, Ebang International's road to listing is still uneven and full of unknowns.

On July 18, 2018, Yindou.com officially announced that Li Yonggang, the actual controller of the company, had run away. At that time, Yindou.com accumulated a total of 4.33 billion yuan to be repaid, and there were 23,464 lenders to be paid. In October of the same year, victims of the Yindou.com case came to Yibang International to collect debts. According to the victim, from December 2017 to February 2018, Cui Hongwei, the wife of Li Yonggang, the actual controller of Yindou.com, transferred a total of 524.9 million yuan to Ebang International. Bang International transferred a total of 380 million yuan to Cui Hongwei, and the whereabouts of the remaining 144.9 million yuan is unknown. They believe that Yibang International inflated sales revenue or collected deposits to fabricate sales contracts to whitewash reports to achieve the purpose of listing smoothly.

At the same time, in the shareholding change records of Hangzhou Yibang Hongfa Technology Co., Ltd., the parent company of Ebang International, some rights defenders found that the name of Yindou.com Finance was impressive. This has to make people doubt that Yibang International and Yindou.com are really just a cooperative relationship?

In this regard, the relevant person in charge of Yibang International said that the matter is not true, and the remaining more than 100 million yuan has been used to purchase equipment, which is a normal contract payment. However, the person in charge said that it was not convenient to disclose the reason for the 380 million yuan refund. According to Wang Hongyong, vice president of Ebang International, 389 million yuan is the deposit for Yindou.com to purchase cloud computing servers, and Yindou.com's finance is indeed a shareholder of Ebang.

In addition, Yibang International is also deeply involved in the case of contract fraud. In December 2019, the listed company Zhongying Internet announced that Zhejiang Yibang and its wholly-owned subsidiary Yunnan Yibang were suspected of contract fraud in a sales contract dispute with Xincailiang. Subsequently, Ebang International issued an emergency statement on the public account "Yibit Customer Service Account", saying that Zhongying Internet, as a listed company, has seriously inaccurate information disclosure and is suspected of violating laws and regulations, and the reporting materials have been accepted by the above-mentioned departments according to law.

From cooperation to mutual litigation in court, the Rashomon caused by this 500 million yuan business has been exposed to the public. The matter dates back to March 2018, when Xincailiang purchased 100,000 cloud computing servers from Zhejiang Yibang and Yunnan Yibang, with a total payment of 504 million yuan. However, Xincailiang said that it only received 65,000 units, and the remaining 35,000 units were not delivered, while Yibang claimed that all 100,000 mining machines had been delivered. The 35,000 mining machines that disappeared mysteriously brought the two sides into a stalemate.

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Relying on large customers, cash flow is tight, can relying on loans from related parties solve the urgent need?

Ebang International's business mainly relies on large customers. According to the prospectus, the sales of Ebang International are mainly for enterprises and individuals. As of December 31, 2018 and December 31, 2019, 33% and 15% of the total accounts receivable of Ebang International came from the same customer respectively. , while about 71% and 42% of accounts receivable come from three customers respectively.

At the same time, in 2018 and 2019, Ebang International's top three customers each contributed 34% of revenue, while the top ten customers contributed approximately 57% and 58% of revenue. On the revenue side, customer revenue in the Chinese market accounted for 91.4% of total revenue in 2018, and 87.5% in 2019.

For Ebang International, will it be a "double-edged sword" to rely heavily on major customers and the Chinese market? Xie Dan, former technical director of Bitmain and general manager of Chengdu Xinmai Microelectronics, told PANews, "Mining machines need to be sold to mining farms, and the distribution of mining farms is like this. There is no problem with this. The risk is not big."

Affected by operating performance, Yibang International has long been heavily in debt. In 2018, total liabilities were $81.627 million; in 2019, total liabilities were $57.04 million. At the same time, Ebang International's accounts receivable and inventory shrank year-on-year. In 2019, Ebang International's accounts receivable decreased by 62%, and its inventory decreased by 80%. In addition, the prospectus also shows that as of the end of 2019, Ebang International has other payables of 13.739 million and accounts payable of US$11.832 million.

It can be seen that Yibang International's cash flow is not sufficient. Under the further expansion of its losses, Yibang International raised the maximum amount of funds raised, which also reflected to a certain extent the eagerness of Yibang International for short-term funds.

Ebang International stated in the listing press release that at present, Ebang has completed the design of 8nm and 7nm ASIC chips, and has begun to focus on the development of 5nm ASIC chips and other non-Bitcoin cryptocurrency mining machines.

"Now entering 7/5nm, the design + production is so high, and the industry threshold is so high. In addition, Ebang did not make enough money in the previous cycle, so it really needs more funds." Xie Dan pointed out.

In fact, the prospectus once revealed that at present, Ebang International's cash, cash equivalents and limited-purpose cash are only 5.778 million. Due to future business development needs, additional cash resources may be required, and if cash resources are insufficient, it may seek to issue additional equity or debt securities or extend credit lines, etc.

In fact, in the past, Ebang International mainly relied on shareholder contributions and bank loans to meet its funding needs. For example, as of December 31, 2019, Ebang International had borrowed US$1.05 million from Hu Dong’s brother-in-law Qian Shubo, and his younger sister Hu Jun had borrowed US$2.081 million. Currently, Yibang International has a total outstanding loan of US$31.1 million. And from January 10 this year, when Ebang International repaid the loan to Haitong International Credit, it borrowed 749,900 US dollars from its founder Hu Dong. It can be seen that Ebang International's cash flow is already very tight.

Speaking of Hu Dong, one has to mention him and the Hu family behind him. Compared to Bitmain Wu Jihan and Canaan Yunzhi Zhang Nangeng, Hu Dong appears to be relatively low-key, and he is rarely seen in public in the circle, and he is considered a "hermit" among mining machine tycoons.

The Hu family with Hu Dong as the core has always been the largest shareholder of Ebang International. According to the latest prospectus, Hu Dong holds 46,738,276 ordinary shares, accounting for 41.82% of the total share capital. Hu Dong's brother-in-law Qian Shubo and his sister Hu Jun's affiliates hold 9,755,392 ordinary shares, accounting for 8.73% of the total share capital. After the listing, Hu Dong will hold 35.7% of the shares and have 91.7% of the voting rights, while Qian Shubo and Hu Jun will hold 7.4% of the shares and have 1% of the voting rights.

His wife Jiang Aiqun and father Jiang Ruhui all directly or indirectly hold shares in Yibang. It can be said that the Hu family holds the absolute right to speak.

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Source: Blue Whale Finance

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There are fierce tigers in the front and chasing soldiers in the back. It is not easy to be a "blockchain second stock"

Ebang International is losing the high-end market and computing power pricing power.

According to the prospectus data (as shown above), in 2018, Yibang International Ebit sold 139,764 E9+ units with a unit price of US$721; the E9 series sold 231,351 units with a unit price of US$178; the E10 series sold 44,815 units with a unit price of US$3,676.

In 2019, Ebang International Yibit sold 2,000 units of E9+ at a unit price of US$102; the E9 series sold 151,233 units at a unit price of US$74; the E10 series sold 87,293 units at a unit price of US$341; the E12 series sold 49,427 units at a unit price of 948 Dollar.

Judging from the data, both the sales volume of each series of mining machines and the average unit price have dropped sharply. Among them, the E9 and E10 series accounted for nearly 80% of the shipments.

Yibit E12 series is the most advanced machine sold by Ebang International, but its computing power of 44 Th/s and energy efficiency of 57W/t can only be compared with the energy efficiency of Bitmain’s previous generation main paving machine T17 quite. It is understood that the ant mining machine T17 has a stand-alone computing power of 40 Th/s and an energy efficiency ratio of 55J/T.

In addition, Bitmain announced two new S19 series ant mining machines, among which the S19 Pro ant mining machine has a maximum computing power of 110TH/S and a power consumption of 30W/T. At the same time, Whatsminer also released the new Whatsminer M30 series this year. Among them, M30S++ and M30S+ are compared to Bitmain’s Antminer S19 Pro and S19 respectively, and M30S++ is even better than S19 Pro in computing power.

In fact, in the past nearly a year, Yibang International has been living on its laurels and has not launched new products. Many miners told PANews that few people are using Yibit mining machines, and most miners will choose to use Antminer S17, Shenma mining machines, etc. for mining.

In this case, Ebang International's research and development expenses are also decreasing. In 2018, the research and development expenses were US$43.5 million, and in 2019 it was only US$13.4 million. You know, the research and development expenses of Canaan Technology in the same period were 24.14 million US dollars.

Water can carry a boat and capsize it. In the face of aggressive competitors, Ebang International's backward energy efficiency of bitcoin mining machines can only erode its market share. Especially after the high water season, old mining machines with low mining efficiency and low income will be gradually eliminated.

Perhaps aware of this, Ebang International disclosed in the prospectus that they focus on developing 5nm ASIC chip mining machines with independent intellectual property rights for non-Bitcoin cryptocurrencies, such as Litecoin and Monero. Although the market for Litecoin and Monero is not that big compared to Bitcoin mining machines, this may be a new path.

In addition, Yibang International also disclosed in the prospectus that it will establish a cryptocurrency exchange outside of China to provide services related to cryptocurrency transactions for the cryptocurrency community. Compared with mining machines, the exchange is a fast-growing business. However, at the moment when the market competition pattern is almost fixed, Ebang International may not be able to gain an advantage by scrambling for meat.

In addition to facing the mountain of business growth, the crisis of confidence caused by US and Chinese concept stocks has also added a bit of haze to the listing of Ebang International. PANews once published "Policy Tightening! The U.S. and China’s concept stocks are facing a big stranglehold, and it is even more difficult for crypto companies to “go overseas” to list.” The article mentioned that affected by Luckin’s fraud, Nasdaq announced some new requirements for IPOs. $25 million or more, or at least a quarter of its post-listing market capitalization. For companies going public in the United States, these requirements are invisible thresholds.

The vibe in America seems to have become less friendly. In April this year, SEC Chairman Jay Clayton said that investors should pay attention to information disclosure issues of Chinese companies listed in the United States, and when adjusting their positions, they should not invest funds in the stocks of Chinese companies listed in the United States. In May of this year, Trump put pressure on American pension funds to withdraw from Chinese concept stocks. And this month, it ordered a review of violations of US regulatory standards in Chinese concept stocks.

As the U.S. market has increasingly stringent regulations on Chinese concept stocks, the current situation of U.S. and Chinese concept stocks can be described as "walking on thin ice." Take Canaan Technology, which is also in Hangzhou, as an example. Although Canaan Technology has been lucky enough to be listed in the United States, since its listing, apart from being short-sold twice, its stock price has also continued to fall, and it has fallen below $2. , the lowest level since its listing in November last year. At the initial stage of listing, Canaan Technology’s issue price was US$9.

Will Ebang International follow the old path of Canaan Technology? At least from the perspective of single business model, continuous decline in performance, and backward technology, the two have great similarities. In Xie Dan's view, Ebang International was looking for Xinyuan to make chips before. It is difficult for chip design service companies to be competitive because they seldom consider cost and chips need profits. At present, Ebang International and Canaan Technology have not accumulated enough chip design, and the biggest risk is that the 7/5nm chips are not good enough.

However, Xie Dan believes that it is not a big problem if Yibang does not use AI. In order to be competitive, Ebang must make chips with its own team. Considering the technical threshold of low power consumption of Bitcoin chips, it is best for the chip team to have experience in the Bitcoin chip industry. The best way is to recruit some people from Bitmain or MicroBT (resigned or in-service), solve the core technology, or jointly develop with others, cooperate in various business models, and share risks.

On the left is the pressing force of mining machine manufacturers, and on the right is the crisis of confidence in Chinese concept stocks. For Ebang International, listing is just the beginning, and a more difficult battle is yet to come.

Zheng Yi of PANews also contributed to this article.