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On August 4, Hurun Report released the "2020 Hurun Global Unicorn List". There are 11 blockchain companies on the list, namely Ripple, Coinbase, Bitmain, Kraken, Binance, Circle Internet Financial, Block.One, Dfinity, Figure Technologies, BitFury, and Liquid Global. 11 companies on the list, data source: Hurun Report
Bitmain’s valuation drops 62.5%
Compared with last year, the rankings and valuations of Ripple and Binance have increased, while the rankings and valuations of seven companies have declined to varying degrees, with Bitmain suffering the most significant decline.
Bitmain is now valued at RMB 30 billion, down 62.5% from last year's RMB 80 billion, making it one of the five companies on the list with the largest valuation declines.
Hurun said: "Bitmain's valuation has declined mainly because Canaan Creative's stock price has performed mediocrely since its listing, and the valuation of the blockchain industry has been under pressure."
On the one hand, the market performance of Canaan Creative and Ebang International has lowered the industry's valuation, but what really consumes Bitmain is its unstoppable "palace fighting".
In May, Wu Jihan's "snatching" of business licenses made headlines in various media; in June, Zhan Ketuan broke into the Beijing Bitmain office, forced employees to fight, and prevented the delivery of mining machines to customers; in July, about 10,000 mining machines managed by a subsidiary of Bitmain Group in the Zhenglan Banner mine in Inner Mongolia Autonomous Region were illegally transferred. Recently, some media reported that in order to compete for employees, Zhan Ketuan said that employees could get 1.5 times the salary, and Wu Jihan said that employees could get 2 times the salary in odd months.
Every once in a while, news of Bitmain’s “palace fight sequel” breaks out, and the serious internal friction has dragged down the company’s performance.
Over the past three years, Bitmain has controlled most of the ASIC mining machine market. But at the end of last year, cryptocurrency research firm CoinShares pointed out that Bitmain may have lost 10% of its market share in 2019, and this trend is expected to continue in 2020. CoinShares believes that this is due to poor strategic decisions of the company.
ASIC mining machine market share, source: Bitmex Research
In an analysis article published in May, The Block stated that five of the ten most profitable mining machines are MicroBT's Shenma mining machines. MicroBT sold more than 500,000 mining machines in 2019, and its market share has reached about 35%, which is constantly encroaching on the market share of the leader Bitmain.
With years of accumulation, Bitmain's position in the mining machine industry cannot be underestimated, but the current Bitmain is no longer the Bitmain of the past. Bitmain's employees also realize that Bitmain's current advantages are only brand and technology, but if the two sides continue to stalemate, Bitmain will inevitably collapse.
Listed mining companies Canaan Creative and Ebang International were replaced <br />It is worth noting that Canaan Creative and Ebang International, which were on the "2019 Hurun Global Unicorn List", were not on the list this year. Instead, they were replaced by Kraken and Figure Technologies, which were on the list for the first time.
It is reported that Kraken is a Bitcoin exchange headquartered in San Francisco and has become one of the most active digital currency exchanges in the United States. Figure Technologies is a financial technology company headquartered in San Francisco and co-founded by Mike Cagney, the founder of the financial technology unicorn SoFi.
The valuation of the last-ranked company on the list is RMB 7 billion, which means that the valuations of Ebang Creative and Canaan Creative are less than RMB 7 billion. Last year, Hurun Report valued Canaan Creative and Ebang International at RMB 20 billion and RMB 10 billion, respectively.
According to conservative estimates, Canaan Inc.’s valuation has fallen by at least 65%.
On November 21, 2019, Canaan Inc. CEO Zhang Nangeng rang the bell, and Canaan Inc. was officially listed on the Nasdaq, becoming the "first mining machine stock" in the blockchain industry. The opening price on the day of issuance was $12.6, a 40% increase from the IPO price of $9. However, the listing did not extend Canaan Inc.'s life, but instead seemed like a "death warrant."
Since the Bitcoin halving on May 11, Canaan Inc.'s Nasdaq-listed shares have been falling steadily, even falling below $2 in June, setting a new low since its listing.
In March this year, a shareholder of Canaan Creative formally filed a lawsuit against the company, claiming that the company had violated the U.S. Securities Act and accused Canaan Creative of misleading investors about the company's financial and operating conditions in its initial public offering (IPO) application submitted to the U.S. Securities and Exchange Commission (SEC).
In addition, three US law firms intend to file a class action lawsuit against Canaan Creative.
According to public media reports, Canaan Creative tried to cut prices in the first quarter of this year, reducing prices by about half compared to the average price in 2019, but the company disclosed that it still lost $5.6 million. In addition to the decline in sales due to the impact of the new crown epidemic, the company invested $24.5 million in the first quarter to cooperate with domestic chip manufacturer SMIC, resulting in a 47.9% drop in monetary funds and their equivalents in the first quarter, down from $71 million at the end of last year.
In April this year, Canaan Creative released its first unaudited profit report since its listing. The report pointed out that Canaan Creative had a net loss of US$148.6 million in 2019, with annual revenue of US$204.3 million, and its profitability has declined in the past three years.
Canaan Creative’s quarterly gross profit, Source: Bitmex Research
In May, White Diamond Research, a research organization whose main business is shorting U.S. stocks, released a report saying that Canaan Creative's new generation of mining machines, AvalonMiner 1066Pro, are less profitable than its competitor Bitmain's mining machine s17e. Due to insufficient performance, Canaan Creative's mining machines are currently "unprofitable" for miners.
In early July, a series of industrial and commercial changes at Canaan also triggered speculation about internal fighting within the company. Although director Kong Jianping came out to refute the rumors, it did not stop the speculation. Until recently, Canaan Technology officially announced changes to the board of directors.
The announcement shows that the terms of directors Kong Jianping and Sun Qifeng expired on July 31, and the terms of the other three independent directors Zhang Hong, Yang Xiaohu and Luo Mei also expired on August 1. The announcement stated that the outgoing directors will not continue to run for the board of directors. Canaan Technology announced the appointment of four independent directors to the board of directors, effective August 1, namely Zhang Wenjun, Du Hongchao, Shu Zhitang and Zhang Yaping. So far, the "internal fighting" public opinion has calmed down.
At the same time, the performance of Yibang International, which went public on June 26 this year, was not satisfactory.
According to the financial data disclosed in the prospectus of Ebang International, in 2019, Ebang International's total revenue was US$109.1 million, a year-on-year decrease of 65.80%; the net loss was US$41.1 million, a year-on-year increase of 2.48 times. According to the unaudited financial performance data of Ebang International in the first quarter of 2020, as of March 31, 2020, Ebang International's net loss reached US$2.5 million, compared with US$600,000 in the first quarter of 2019, the loss continued to expand.
Industry insiders generally believe that Yibang International is seeking to go public in the bleak market environment because it is in urgent need of financing to alleviate financial pressure. At the same time, there are also reports that investors are eager to exit.
In 2019, Ebang International sold a total of 289,950 units of four types of mining machines. In comparison, in 2018, although only three types of mining machines were sold, 415,900 units were sold, a sharp drop of 30%. At the same time, miners do not have a high opinion of Ebang International's mining machines.
Faced with failure in the mining machine market, Ebang International will use the funds raised from its IPO to expand its mining farms and establish exchanges, trying to make "quick money" to make up for its losses.
"Investment institutions have always had doubts about mining machine manufacturers," said Li Lianxuan, chief researcher at OKLink Research Institute, when Ebang International went public. First, compared with the rapid growth in revenue and profits in 2017 and 2018, both listed companies experienced a significant decline in 2019. Poor operating performance makes it difficult to support stock prices; secondly, the revenue of the mining machine business is extremely dependent on the price trend of cryptocurrencies, and the cryptocurrency market has high-risk characteristics, which makes the mining machine business very unstable, and investors will have concerns about the "sustainable operation" of the company.
At present, Ebang International is actively seeking transformation. In July, Ebang International won the bid for a 369 million yuan order from China Telecom. The project was a common 1G PON government and enterprise gateway for telecommunications equipment. In addition, it also reached cooperation with Yinjiang Co., Ltd. in smart cities and city brains, 5G communication technology, and blockchain technology.
Conclusion <br />Guo Xinghua, chief blockchain expert at China Economic and Social News Agency, once said that mining machine manufacturers themselves have a relatively single business, their income mainly depends on the virtual currency market situation, and their ability to withstand risks is weak. In addition, Ethereum has been transitioning to proof of stake, and after virtual currency transitions to the hybrid proof and proof of stake stages, coupled with the research and development of anti-ASIC chip algorithms, all of these are fatal blows to mining machine companies.
Of the 11 blockchain unicorns, only Bitmain remains from the former “Big Three” mining companies, and the company is hampered by internal strife. The story of the “Big Three” mining companies seems to have come to an end. (Blockchain Frontier)
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