What enlightenment did Bitmain give to the market in the past six months

On the eve of the expiration of the Hong Kong Stock Exchange’s listing application, on March 26, Bitmain CEO Wang Haichao and two co-founders Ketuan Zhan and Jihan Wu jointly issued a heavy internal letter.

It not only officially announced Wang Haichao as the CEO of the company, but also re-examined the company's business, focusing on digital currency and artificial intelligence chips. He also said frankly, "This round of our IPO application will expire in the near future. In the future, we will restart the listing work at an appropriate time."

In the past six months, Bitmain has been shrouded in rumors of "layoffs", "executive changes", and "IPO failure". Now, Bitmain has personally cleared the fog and steered this giant ship back to the main channel.

The old consensus has disintegrated, and the new consensus has not yet been formed. In an era full of changes in the blockchain, Bitmain's road to listing and the way to survive educate market participants - pay attention to timing and adjust focus.

The general environment drags down the unicorn Hong Kong Stock Exchange to list a new opportunity

As a unicorn in the field of digital currency, Bitmain’s every move has attracted much attention since it submitted its prospectus to the Hong Kong Stock Exchange in September last year. According to the relevant regulations of the Hong Kong Stock Exchange, if the IPO application fails to enter the listing hearing stage after six months of submission, it means that the listing application is invalid, but the applicant can still resubmit the application after three months.

In fact, Hong Kong stocks are not necessarily the best choice for Bitmain. In the past year, the currency market has fallen fiercely, and Hong Kong stocks are also "not to be outdone." At present, many mainland listed companies listed on the Hong Kong stock market in 2018 have seen a huge drop in stock price, and even star companies such as Huifu, 51 Credit Card, and Inke cannot escape the fate.

According to the China Securities Journal, as of the end of 2018, among the 208 companies listed in Hong Kong that year, 111 companies’ closing prices fell below the price on the first day of listing, and the breakout rate was as high as 53.37%. Among them, among the 86 companies registered in the Mainland, the latest closing price of 58 companies was lower than the issue price, and the breakout rate reached 67.44%. Listing and breaking the stock will undoubtedly have a huge negative impact on subsequent public market financing and corporate confidence.

Behind the breaking trend is the overall economic downturn. Under the cyclical economic adjustment, the traditional primary and secondary markets and the digital currency market cannot escape the value correction.

There are also traditional Internet companies that have slowed down the pace of listing in Hong Kong under this general environment.

Under the pressure of the Hong Kong stock market breaking, it is not worthwhile to "bleed" in exchange for listing financing opportunities. It is not a good thing for Bitmain to go public at this time. Moreover, Bitmain also stated in an internal letter that at present, the company has sufficient cash and the supply chain is operating normally.

Now, Bitmain has postponed the listing process, waiting for the right time to restart the listing work. However, in addition to the long waiting time for the previous listing application, Bitmain also submitted materials such as corporate financial audits, asset evaluation reports, verification opinions from sponsors, stock issuance plans and announcements, etc. After going through various procedures, Bitmain’s Corporate governance is undoubtedly more transparent and standardized.

The policy environment for the listing of blockchain companies is not yet mature

Some investment bankers analyzed to PANews that in the absence of current policy support, it is really difficult for blockchain-related companies to go public. There is basically no IPO precedent for mining machine companies, whether they are US stocks or Hong Kong stocks.

In an interview with Tencent News at the Davos Forum in January, Li Xiaojia, CEO of the Hong Kong Stock Exchange, responded that the core principle of the Hong Kong Stock Exchange is "listing adaptability" and whether major changes in external supervision are expected. Mining machine manufacturers closed the door to listing. The Hong Kong Stock Exchange's "listing adaptability" principle has not yet been clearly stipulated, and there is no top-level policy design for the blockchain as an emerging industry.

This can’t help but make people think that six years ago, Alibaba was rejected by the Hong Kong Stock Exchange due to its dual shareholding structure. Pa.

In fact, it is difficult for blockchain companies to go public, not only in China.

As early as the end of 2017, Asiff Hirji, the president of the US digital currency exchange giant Coinbase, revealed his intention to apply for an IPO, bluntly saying that "IPO is the most likely path for Coinbase in the future." In response to rumors of an IPO listing, the COO of Coinbase responded to Bloomberg that "Coinbase will not conduct an IPO in the short term."

Similarly, Bitfury, a mining machine manufacturer, has also considered an IPO as one of its strategic options for raising funds, and plans to apply for an IPO in 2019. However, a financing was carried out in November last year, and its chief operating officer John Mercurio said in an interview that the final decision on whether to conduct an IPO has not yet been made.

Whether it is an IPO or a "backdoor" curve listing, there are very few successful ones, and even if it goes public, investors may not necessarily be optimistic about it at this time.

Galaxy Digital Holdings, which was successfully backdoor listed in Canada, fell 20% shortly after its listing in November last year. Canadian securities regulators once asked the stock to suspend trading and asked the company to clarify whether there was any undisclosed information.

The road to listing of digital currency-related companies can be described as bumpy. The changes in the economic environment and the lack of top-level systems have made the route foggy. The moment when the clouds are clear is the right time.

Sizing up the situation and adjusting the strategy

At the beginning of this year, there were photos circulating on the Internet of Wu Jihan growing a beard, hugging Ketuan Zhan and crying, and taking photos with his colleagues at the Bitmain annual meeting. Presumably at this time, Bitmain is experiencing internal pains, learning from the pain and adjusting its strategy.

When the capital market is cold, it should return to the main business to accumulate potential energy.

The open letter on March 26 stated that it will focus on all human, material, financial and cultural resources in the two markets of digital currency and artificial intelligence: focus on computing power chips. "The two huge markets will be superimposed in the next three to five years. High-performance, low-power computing chips are their common foundation, and this is where our core competitiveness lies."

"We re-examined the company's business, organizational structure and management mechanism, and made corresponding business adjustments: focusing on digital currency and artificial intelligence chips and products and services based on them; established ant mining machines, Suofeng chips, AI computing power, ant mining pool, BTC.COM, self-operated computing power and other business lines. We have delegated management authority, quickly responded to market changes, and better served customers. We also have chip, hardware and software research and development resource lines All pull-through, digital currency and artificial intelligence products share the research and development resources after pull-through. In this way, the investment, delivery and quality of each project and product are better guaranteed. At the same time, engineers can also get greater benefits in different product lines training and growth.”

Bitmain’s transformation and adjustment should have been brewing for a long time. As early as January 26, Bitmain revealed signs of adjustment on its English official blog. "Bitmain decided to reorganize the company's business at this important point in the end of 2018. The size and scale of the company's investment portfolio and business have grown to the point where it is facing a choice. Therefore, we decided to start optimizing the investment portfolio and streamlining the business line in order to re- Focus the company on the core activities that best support the company's vision."

"In the short term, Bitmain's mining machine sales will be affected by the price of digital currency assets. In the long run, the company's value is not only reflected in the sales of encrypted digital mining machines, but also in the layout of AI chips and related fields. We are very optimistic about the market outlook.” Bitmain’s A-round investment institution, executive director of Sinovation Ventures, and vice-president of Sinovation Ventures’ AI Engineering Academy Wang Jiaping said in an interview with PANews that what impressed him initially was the risk control ability of the Bitmain team .

"At the beginning, it is very narrow, and then you can understand people. After walking dozens of steps, you will suddenly become enlightened." Tao Yuanming once wrote. Bitmain once encountered a narrow valley, and now it seems to have suddenly opened up. The digital currency has gone through several rounds of bull and bear cycles, and those who persist will be the winners.