Yibang International IPO Survival: Mining machine loses momentum, wants to set up an exchange, seeks loans from related parties

Editor's Note: This article comes fromDeep tide TechFlow (ID: Tech-Flow)Editor's Note: This article comes from

Deep tide TechFlow (ID: Tech-Flow)

Deep tide TechFlow (ID: Tech-Flow)

, Author: Bonnie, reproduced by Odaily with authorization.

If nothing else, mining machine manufacturer Ebon International (NASDAQ: EBON) will be listed on NASDAQ at 9:30 p.m. Beijing time on June 26, with a fundraising scale of US$86.94 million to US$125 million.

Five years and a quarter, how many twists and turns. This time, it is the fourth time that Yibang International has entered the capital market.

Open the prospectus of Yibang International, what is unknown behind it?

Mining machines are losing momentum, borrowing from related parties to survive, investors are eager to withdraw, intending to open a cryptocurrency exchange, and have been involved in lawsuits... Shenchao TechFlow explores the "second share of mining machines" by interviewing relevant people and dismantling the prospectus the other side.

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Mining machine loses momentum: shipments drop by 30%

How is Yibang International's mining machines selling?

According to information on the official website of Yibit (Ebang International’s mining machine brand), it is currently selling four models from E9 to E12, 13 types of mining machines, the price ranges from 2,000 yuan to 13,200 yuan, and the computing power ranges from 11.5 TH/s ranging from 44 TH/s to 44 TH/s.

According to the prospectus, in 2019, Ebang International's four types of mining machines sold a total of 289,950 units. In contrast, in 2018, although only three types of mining machines were sold, 415,900 units were sold. Volume dropped by 30%.

What is even more exaggerated is that the price of Yibit mining machines has fallen sharply. For example, the average unit price of the Yibit E10 series in 2018 was US$3,676. After one year, the average unit price dropped to US$341, a price drop of 90%.

Zhou Yun, a bitcoin miner, revealed that Yibit’s mining machines “basically have never seen those with large computing power, and those with small computing power have been eliminated.”

The high computing power machines mentioned by Zhou Yun generally refer to mining machines with a capacity of more than 40 TH/s. Under the current currency price, with the continuous rise of Bitcoin’s computing power (from the middle of last year to the present, Bitcoin’s computing power has doubled), mining machines with large computing power and excellent power consumption ratio will have an advantage, while small Mining machines with low computing power and power consumption (such as S9) will be gradually eliminated.

According to the official website, except for the E12 series, Ebit’s mining machines are all small computing power machines, but even the Ebit E12 with the highest computing power, compared with Bitmain’s 95T S19 and BitMicro 88T’s M30S series, which are not much different in price, can Fully doubled.

Under the same conditions, a mining machine with a smaller power consumption ratio and a larger computing power value can bring higher income.

The power consumption ratio and computing power value largely depend on the chip manufacturing process. The Antminer S19 uses a 7nm process chip, the Whatsminer M30 uses an 8nm chip, and the Ebit E12 uses a 10nm chip.

Ebang International stated in the prospectus that it has successfully designed 7nm and 8nm chips in 2019, and is focusing on the development of 5nm ASIC chips for mining Litecoin, Monero and other cryptocurrencies.

However, TSMC, the world's largest wafer foundry company, can only complete the mass production stage of the 5nm process in the third quarter of this year. It will take time for Ebang International to make a breakthrough in the 5nm field. In addition, Ebang completed the design of the DASH coin and Monroe coin mining machines in 2018 and 2019, but they have not yet been released.

Unlike Antminer and Whatsminer, which are widely used by various miners, Ebang International relies heavily on large customers.

According to the prospectus, Ebang International's mining machines all adopt the direct sales model without any distributors, agents and channel dealers.

According to the prospectus data, in the two years of 2018 and 2019, 33% and 15% of the total accounts receivable of Yibang International came from the same customer, respectively, and about 71% and 42% came from three customers respectively.

On the income side, in the past two years, the company's top three customers contributed 34%, and the top ten customers contributed 57% and 58% of the revenue.

Major customers have become the pillar supporting the survival and development of Ebang International.

For example, on October 28, 2019, Ebang International and Madison Holdings Group Co., Ltd. (08057.HK) (hereinafter referred to as Madison) entered into a non-legally binding memorandum of understanding regarding potential business.

According to the memorandum, Madison will acquire blockchain computing equipment, cryptocurrency mining machines and computing chips from Ebang with a total amount of no more than US$100 million before December 31, 2020.

In addition, a subsidiary of the A-share listed company Huatie Technology also purchased 24,000 mining machines from Ebang in May 2018. The P2P platform Yindou.com, which has already been thundered, also purchased 24,000 mining machines from Ebang from the end of 2017 to the beginning of 2018. Bought 500 million yuan of mining machine products.

However, Ebang International's Yibit mining machine has a bad reputation in the Bitcoin mining circle.

"His mining machine is not good, the sales are not good, and the quality is too poor-the data of the mining machine is not correct, the failure rate is high, and the after-sales service is terrible. Just an OEM (factory), it is basically a hammer. Buying and selling.” A bitcoin miner told Deep Tide TechFlow.

On December 20, 2017, Ebang held a press conference in Hangzhou to release Ebit E10. At that time, it was the craziest time for the price of Bitcoin, which once broke through the highest price of 20,000 US dollars, and the Bitcoin mining machine was called a money printing machine.

"The most important thing for a mining machine is the power consumption ratio and stability." Zhou Yun introduced that the Yibit mining machine does not account for either.

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Loss expansion: Borrowing to survive

Mining machines are not selling well, and the financial data is naturally not much better.

According to the financial data disclosed in the prospectus, in 2019, Ebang International had a total revenue of US$109.1 million and a net loss of US$41.1 million; in comparison, its total revenue in 2018 was US$319.0 million and its net loss was US$11.8 million.

In other words, in 2019, Yibang International's revenue fell by 65.80%, and its net loss increased by 2.48 times.

The collapse of both income and profits caused the balance sheet of Yibang International to shrink sharply.

In 2019, Ebang International's total assets were US$82.61 million, a decrease of 44% compared with 2018, and accounts receivable and inventory decreased by 62% and 80% respectively.

Under the sharp drop in revenue, cash flow has become the primary problem facing Ebang International.

As of the end of 2019, its cash, cash equivalents and limited-purpose cash amounted to US$5.77 million. On January 10 this year, the company repaid the US$4.872 million short-term loan of Haitong International Credit Co., Ltd. Probably less than a million dollars in cash. For comparison, Jianan Technology’s cash and cash equivalents in the same period were 524 million yuan.

How serious is Yibang International's cash flow? In the first half of 2020, borrowing has become the main task of Ebang International.

Where is Dewang in Hong Kong?

We have noticed a detail. In 2016, Hangzhou Yibang had acquired 51.05% of the equity of Hangzhou Dewang through capital injection. Relevant information shows that Hong Kong Dewang Co., Ltd. is controlled by the relatives of Hu Dong, the founder of Yibang International. The loan is essentially Loans to related parties.

It is worth mentioning that on the day when Haitong International repaid the credit of US$4.87 million, Ebang International borrowed US$750,000 from the founder Hu Dongna, which seems to be a sign of tight cash flow.

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Behind the listing: Many investors are eager to exit

In addition to the tight cash flow and the need for listing congestion, there may be a group of investors who are eager to reap returns supporting Ebang International's listing momentum.

According to the information disclosed in the prospectus, Ebang International founder Hu Dong is still the largest shareholder.

Before the IPO, the founder Hu Dong held 41.82% of the shares, and Hu Dong's sister and brother-in-law's affiliates (Affiliates of Shubo Qian and Jun Hu) held 8.73% of the shares.

After the IPO, Hu Dong held 35.7% of the shares and had 91.7% of the voting rights; Affiliates of Shubo Qian and Jun Hu held 7.4% of the shares and had 1% of the voting rights.

In addition to the Hu Dong family having the absolute right to speak, there are also a group of financial investors waiting to withdraw.

Unlike Bitmain, which has a few star institutional investors such as Sequoia Capital, IDG, and Innovation Factory, Ebang International has many and complex investors.

In the prospectus, Yibang International stated that at the beginning of the registration of the Cayman company in May 2018, it issued ordinary shares to 51 companies, but in the list of specific shareholders on the same schedule, Deep Tide TechFlow only found 46 companies Nine entities, including Top Max Limited (controlled by Hu Dong), are directly related to members of Ebang International, and the rest are external investors, many of which are from Zhejiang or the Yangtze River Delta region.

According to Blue Whale Finance and Economics, in 2018, Ebang International raised funds through the equity crowdfunding platform Zhongbangtou for entrepreneurial projects, which led to the entry of many retail investors.

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Source: Blue Whale Finance

According to the webpage snapshot information, in the first half of 2018, a "Blockchain technology blockbuster project" landed on Zhongtoubang, "High-end ASIC chip project plans to go public in the United States", "YB is a company with powerful integrated circuits..." words It makes people think about it, and you may have guessed that this company is Ebang International.

In August 2019, Zhu Pengwei, chairman of Zhongbangtou, personally led a group of investors to investigate the "high-end ASIC chip" project, and the address was the same as the office address of Zhejiang Ebang Communication Technology Co., Ltd.

At present, both the official website of Zhongtoubang and the official Weibo have deleted the information related to the Yibang International project.

In any case, after waiting for two years, many financial investors finally ushered in the moment of fruition.

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How to spend money: building mines and exchanges

After the IPO, how will Ebang International use the money?

In the prospectus, Yibang International made the following explanations:

(1) 35%, US$34.1 million, used to expand overseas business and new business, including the establishment of R&D centers and overseas sales and marketing activities;

(2) 20%, USD 19.5 million, to develop and introduce new mining machines;

(3) 15%, US$14.6 million, for company branding and marketing activities;

(4) Others, for general corporate purposes, including working capital needs and other corporate purposes.

Such a statement is too general, and in the hidden part of the prospectus, we discovered the new ambition of Ebang International — to open an exchange.

At present, mining machine hosting is Ebang's second largest business outside of mining machine sales. In 2019, Ebang International earned US$15.72 million from mining machine hosting, accounting for 14.4% of total revenue.

Secondly, Yibang International also stated in the prospectus, "We also intend to establish a cryptocurrency exchange to provide services related to cryptocurrency transactions for the cryptocurrency community in areas near overseas jurisdictions."

For the exchange business, Ebang International issued a risk warning, saying that if the Chinese government further orders to ban foreign platforms that conduct cryptocurrency transactions in China, it may have a significant adverse impact on its business expansion plans and prospects.

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Thorny Road to Listing: Rights Protection, Litigation

For Ebang International, in addition to financing for survival, the IPO listing may also mean a coming-of-age ceremony to bid farewell to cruel youth.

On August 21, 2010, Hu Dong founded Zhejiang Yibang, engaged in the development and sales of communication network access equipment and related equipment, and was listed on the New Third Board on August 19, 2015.

In 2014, during the bear market of Bitcoin, Ebang began to conduct research on the blockchain business and develop mining equipment. Until December 2016, Yibang launched the first self-owned brand mining wing bit E9.

On March 23, 2018, Ebang was delisted from the NEEQ in preparation for restructuring. Since then, Ebang International has embarked on a difficult road to listing.

Beginning in 2018, Ebang International submitted listing applications to the Hong Kong Stock Exchange twice, but both ended in failure.

Li Xiaojia, then president of the Hong Kong Stock Exchange, said that cryptocurrency mining machine manufacturers could not meet the "suitability for listing".

What is listing suitability?

Li Xiaojia explained in an interview with the media:

"For an IPO, the core principle of the Hong Kong Stock Exchange is listing adaptability. Is the business model introduced by the company to be listed to investors suitable for listing? For example, in the past, it made billions of dollars through A business, but suddenly said that it will do B in the future. business, but there is no performance yet. Or the business model of B is better, then I feel that the business model of A that you brought to the market at the beginning is not sustainable. Also, the regulation was ignored before, and then the regulation began to control. Can you still do this business and make this money?"

Obviously, the business A mentioned by Li Xiaojia is the mining machine business, and the business B is the AI ​​business that mining machine manufacturers habitually describe.

For other mining machine manufacturers, the blockage of listing is already a "fatal blow", but compared with the experience of Ebang International, this may be just a small ups and downs. The road to listing of Ebang International is full of thorns.

In 2018, Ebang International was deeply involved in the "thunderstorm" of Yindou.com, a mutual financial wealth management platform.

On July 18, 2018, Yindou.com announced that due to the loss of contact with the company's actual controller Li Yonggang, the funds could not be cashed temporarily, and Yindou.com would cease operations from now on.

Some investors who suffered losses found that from the end of 2017 to the beginning of 2018, part of the funds of Yindou.com flowed into the account of Zhejiang Ebang Communication Technology Co., Ltd.

It just so happened that Ebang International’s revenue in 2017 soared by 878% year-on-year. Investors suspected that some of the self-financing funds of Yindou.com might flow into Ebang International, so they came to collect debts.

In this regard, Ebang International denied it, explaining that it "benefited from the rapid development of Bitcoin transactions", investors did not buy it, and began to write to the Hong Kong Stock Exchange to request the suspension of Ebang International's IPO and to report to the Hong Kong police. This led to the "abortion" of Ebang International's listing in Hong Kong for the first time.

The debt collection and rights protection has not yet passed, and lawsuits have followed one after another.

In December 2017, Ebang International sold a mining machine worth 13 million yuan to a customer, Ma Li. However, due to the discrepancies in delivery time, product performance and product specifications, Ma Li sued, and the lawsuit amounted to 53.9 million yuan.

At the end of 2018, the Hangzhou Internet Court made a ruling in favor of Ebang International. Subsequently, Ma Li refused to accept it and sued the Zhejiang Provincial Higher Court again. On April 7, 2020, the High Court of Zhejiang Province rejected Ma Li's lawsuit and upheld the original judgment.

In addition to individuals, the A-share listed company Zhongying Internet (002464.SZ) also had a transaction dispute with Ebang International. In the end, Ebang won both the lawsuits in Zhejiang and Yunnan.

Looking at the above incidents, although the debt collection turmoil ended in vain and litigation disputes, Ebang all ended in victory, but there is no doubt that the continuous turmoil created many obstacles for Ebang International to go public, and to a certain extent led to the IPO. stranded.

Prior to this, the U.S. stock market had frequent circuit breakers, and the Ruixing Coffee fraud incident triggered a crisis of trust in Chinese concept stocks. Canaan Technology (NASDAQ: CAN), the first mining machine stock, was accused of fraudulent listing documents by a short-selling report and faced at least two class action lawsuits.