Afraid of being sanctioned by the United States due to the Iran issue, Ebang International goes public to survive

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On December 20, the prospectus of Ebang International, a manufacturer of bitcoin mining machines, once again landed on the official website of the Hong Kong Stock Exchange.

In this updated prospectus, Ebang International disclosed the sales of mining machines in the first half of the year, the possibility of being sanctioned by the United States for doing business with Iran, and the litigation issues it faces.

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In the first half of the year, 2 billion yuan of mining machines were sold

According to the latest prospectus information, Ebang International's revenue in the first half of 2018 was 2.138 billion yuan, operating profit was 1.089 billion yuan, and the profit during the period was 931 million yuan, an increase of 43.93% over the same period in 2017.

Its revenue mainly comes from the BPU mining machine business. In the first half of the year, the sales volume of Yibang International Mining Machines was 309,000 units, which was doubled compared with 158,800 units in the same period last year.

Mining machine revenue was 2.115 billion yuan, accounting for 98.9%, compared with 202 million yuan in the same period last year, accounting for 85.1%, while the proportion of its telecommunications business revenue dropped from 11.3% to 0.7%. Ebang International has completely transformed into A mining machine manufacturer.

Although it is now the end of the year, Ebang International’s financial statements are still only counted to the first half of this year. Perhaps this is one of the reasons why it submitted the prospectus ahead of the year: next year, the Hong Kong Stock Exchange will require the submission of the third quarter report Or the annual report, under such a tragic market environment, the "appalling" third-quarter report may become an obstacle to its listing.

In 2001, 28-year-old Hu Dong founded Hangzhou Ebang Information Technology Co., Ltd. in Zhejiang, which is engaged in the supply of communication transmission equipment. Then in 2010, the company was renamed Zhejiang Yibang Communication Technology Co., Ltd. to develop data communication and optical fiber transmission business, mainly connecting with customers such as China Mobile, China Unicom and China Telecom.

At the beginning of 2014, Ebang International, which saw the trend of blockchain, began to develop and produce cryptocurrency mining machines. In 2015, Ebang was listed on the New Third Board, and in the second year launched the first self-owned mining wing bit E9.

Riding on the turmoil of the blockchain, Ebang International has changed from a telecommunications equipment company to a mining machine company.

According to the prospectus, Ebang International’s telecommunications business revenue in 2015 was 62.93 million yuan, which was only 53.26 million yuan at the end of 2017; while the revenue from the blockchain surged from 29.21 million yuan in 2015 to 925 million yuan in 2017 .

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Exports to Iran may be subject to U.S. sanctions

It is worth noting that Ebang International disclosed in its latest prospectus that it had exported telecommunications products worth RMB 4.2 million to Iran, which may have violated sanctions and export control regulations imposed by the United States.

In 2016, Ebang International will sell several microwave communication products worth approximately US$3,000 to customers located in the United Arab Emirates and ship the goods directly to Iran. The payments were denominated in U.S. dollars and cleared through the U.S. financial system, potentially violating U.S. sanctions regulations that apply to U.S. dollar-denominated transactions with Iran.

In 2017, Ebang International exported fiber optic converter products to the Iranian customer and settled in euros. This time, it did not violate the OFAC restrictions on US dollar transactions with Iran.

However, the fiber optic converter sample is configured with export-controlled U.S.-origin components, so it remains subject to BIS and OFAC's Iran sanctions regulations.

If Ebang International is really sanctioned by the United States for this reason, it will be a devastating blow to it. First, the US dollar settlement system will be closed to it, losing overseas markets; second, the chip supply end will also be blocked and face the "risk of shutdown" .

In the prospectus, Yibang International finally explained that the international sanctions legal adviser said that the risk of actually encountering sanctions is relatively low.

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Claims of 50 million due to mining machine quality problems

The blockchain has helped Hu Dong, the founder of Ebang International, realize the freedom of wealth. In October this year, the 2018 Hurun Rich List was released. The list shows that Hu Dong ranked 728th with a net worth of 5.5 billion yuan.

Once Ebang International goes public, its personal wealth will increase in value again. However, at the critical period of the company's IPO in Hong Kong, it encountered "flying disasters".

The first is that Yibang International encountered the Internet financial thunderstorm platform Yindou.com case and the victims came to collect debts.

The debt collection incident was mainly due to the fact that there was a fund transaction of up to 520 million yuan between Yibang International and Cui Hongwei, the wife of Li Yonggang, the actual controller of Yindou.com, of which 380 million yuan was unknown. It quietly appeared in the equity change record of Hangzhou Yibang Hongfa Technology Co., Ltd., the parent company of Yibang International.

All kinds of suspicious signs made the victims of the Yindou.com case suspect that Yibang International was suspected of using Cui Hongwei's 380 million yuan to inflate sales revenue and beautify the report. Yibang International paid back the money.

Victims of the "Yindou.com Case" called the Hong Kong Stock Exchange one after another, requesting the rejection of Ebang International's listing application and reporting the case to the Hong Kong Police Force.

It is mentioned in the latest prospectus that in December 2017, Ebang International sold a mining machine worth RMB 13 million to a customer, but was sued by the customer due to inconsistent delivery time, product performance and product specifications, and the litigation amount was as high as RMB 53.9 million. ten thousand yuan.

Debt collection and rights protection, litigation disputes, and the sharp drop of Bitcoin have created a lot of haze for Ebang International's listing, and the IPO has no choice but to run aground.

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IPO Survival

For Bitmain and Ebang International, whether to go public or not is a matter of life and death, even if blood is shed.

In the current market environment, it has become the norm to break immediately after listing.

According to the statistics of the Beijing News looking for Chinese makers, as of the close of the Hong Kong stock market on the afternoon of December 18, 2018, a total of 33 new economic companies in China have listed on the U.S. and Hong Kong stocks, including 20 U.S. stocks and 13 Hong Kong stocks.

Among the 33 companies that rushed to the market, 91% experienced a breakout, and more than half of them broke on the day of listing. As of December 18, compared with the first day of listing, 79% of the 33 companies have lost their market capitalization, and 18% of the companies have almost halved their market capitalization, with the largest decline exceeding 70%.

Even so, there are still a large number of companies going public one after another, and if they don’t go public this year, it will be even more serious if they go public next year. By 2020, they may not be able to raise enough money.

Next year will be a turning point in the capital market, perhaps as Wang Xing reposted: 2019 was the most difficult year in the past ten years, and it will also be the best year in the next ten years.

And for mining machine manufacturers, they are facing the pressure of life and death. Supplier payments, falling currency prices, accumulated inventory, wages and social security for hundreds of employees will gradually erode the company's cash flow. If the market continues to bear down, many mining machine manufacturers may not be able to survive next summer. When there is an urgent need for external financing.

Twitter netizen BTCKING555 (Note: Mainly released Bitmain’s black material) broke the news that Bitmain lost $740 million in the third quarter and was on the verge of bankruptcy. Now it is pinning its hopes on a successful listing and financing to save itself.

However, Bitmain's road to listing is deeply mired in Rashomon, full of fog.

First of all, foreign media CoinDesk quoted authoritative sources as saying that the Hong Kong Stock Exchange is unwilling to approve Bitmain’s listing application.

Subsequently, a spokesman for the Hong Kong Stock Exchange (HKEX) said in an email that the news of its reluctance to approve Bitmain’s IPO was a rumor.

Finally, the Hong Kong South China Morning Post stated in an article on December 19 that two anonymous sources said that Hong Kong stock market regulators are unwilling to allow Bitmain to conduct an IPO in Hong Kong.

Hong Kong's stock market regulator believes it is premature for any cryptocurrency trading platform or business related to the industry to raise funds through an IPO in Hong Kong until an appropriate regulatory framework is in place.

Public opinion has reversed in turn, and it seems that the entanglement of the Hong Kong Stock Exchange can also be seen. On the one hand, it does not want to take risks and become the first person to eat crabs; on the other hand, it does not want to kill the blockchain with a stick. There is also a video of "Hong Kong Exchange Exploring Blockchain".