"Fat sheep waiting to be slaughtered"? US short-selling institutions once again target Chinese crypto mining companies

As many traditional "failed" companies in the United States have successfully filled Bitcoin mining assets, a large number of Chinese companies have recently begun to follow suit, including 500.com, The 9, SOS and BTBT. Among them, the one with the highest market value is undoubtedly BTBT, which is led by Yuhong.

BTBT's share price soared from less than $1 at the beginning of the year to nearly $30 on January 4, with a year-round surge.

3,691%, and was even listed as one of the ten best performing stocks in 2020. However, due to the short-selling agency J Capital Research, the stock price fell by nearly 30% after the report was released on the 11th, and the current stock price is US$16.

To be fair, J Capital's investigation is not professional, mainly because the crypto mining industry is special and short-selling institutions have no information to follow. Compared with traditional industry companies such as Luckin Coffee, there are more research materials to refer to in the United States. (To obtain the short-selling report PDF for BTBT, please join Wu Shuo Neican Knowledge Planet)

J Capital's short-selling report mainly consists of three core parts:

1. We consulted government officials in the location of the mining farms disclosed in BTBT’s financial report, as well as mining machine manufacturers Bitmain and Shenma. The other party said they had never heard of BTBT, which proves that BTBT’s mining farms and mining machine reserves are false.

(This chain of evidence is naturally very absurd. Due to the sensitive status of mining farms, Chinese government officials will not admit it. Most of the purchases of mining machines come from dealers or mining farm owners who sell second-hand mining machines.)

2. BTBT’s auditing agency was very bad. The stock prices of its underwriting clients fell by an average of 75%. The auditor’s term of office was only 9 months and he resigned 12 days before the end of BTBT’s fiscal year.

3. Five senior executives of Dianniu Finance, the predecessor of BTBT and "China's No. 1 auto loan stock", are in prison and the chairman is on the run.

BTBT then refuted the allegations, and their basic operating conditions can also be seen in the rebuttal:

1. As of the third quarter financial results disclosed on December 18, 2020, the company has a total of 40,865 mining machines, including 7,025 Antminer S17+, 195 Antminer S17E, 32 Antminer S17Pro, 105 Antminer S19Pro, 800 Antminer T3, 9,110 Antminer T17, 256 Antminer T17+, 2,200 Whatsminer M10, 4,125 Whatsminer M20S, 16,917 Whatsminer M21S and 100 Whatsminer M31S. (There is an error in the rebuttal here. T3 should be Xindong instead of Ant)

As of January 15, 2021, there are 14,639 mining machines in Xinjiang; 17,926 mining machines in Inner Mongolia; 1,650 mining machines in Sichuan Province; 4,550 mining machines in Yunnan Province; 2,000 mining machines in Nebraska and 100 mining machines in Texas.

As of December 18, 2020, the company has earned a total of 1,331.2 bitcoins in 2020, which can be verified through third-party mining pools HuobiPool and Antpool.

2. The company's former CEO and CFO were removed from its management and board of directors in October 2019. The company's board of directors elected a new CEO and CFO in October 2019 and established a new management team.

To be fair, the short-selling organization did not ask the key questions, such as the source and ownership of the mining machine, the predecessor of XMAX, and the background of the actual controller, etc. For reference, Yuhong Bitcoin Mining Company said several months before its listing on the US stock market that its mining machines were seized and XMX would not be repurchased. BTBT's response was also relatively professional, so the stock price subsequently stabilized and did not continue to plummet.

Why do short-selling institutions like to target crypto mining machine companies?

First of all, of course, since the industry is new, most of them are taking advantage of the transformation and hype. The original company's main business or shell company is often unsuccessful and has more negative news. Secondly, crypto mining machines, especially in China, are still in a policy gray area. Finally, there are some difficulties in auditing Bitcoin. Professional auditing agencies are often unwilling to participate in the work of such companies, which leads to relatively chaotic financial audits.

Previously, Canaan, the first listed crypto mining company, was also attacked by short-selling institutions, and its stock price also experienced short-term fluctuations. However, this year, with the improvement of performance and the surge in Bitcoin prices, its stock price has also increased. Refer to Canaan's Q3 financial report: Pre-sale amount is nearly 300 million, or it may enter the digital currency industry, and its stock price has risen by 200% in two months

It is expected that a large number of mining farms will go to the United States to go public or go public through backdoor listing in the future, and short-selling institutions will become more and more familiar with Chinese crypto mining companies. Mining is not complicated, and the chain is also very simple. For companies that are about to go public, as long as they do a good job of auditing and compliance, they do not need to be too afraid of short-selling institutions.

Wu Blockchain previously exclusively disclosed that Bitmain and Shenma Mining Machine will also be listed in the United States in the next two years. These two upstream mining companies will bring the Chinese mining industry's US stock listing boom to a climax.