A 360 million yuan order failed to save Yibang's stock price from falling

Author | JX kin

Editor | Wen Dao

On the evening of July 14th, Beijing time, after the U.S. stock market opened, EBON opened high and closed low, first rising from an opening price of US$6 to US$8. The rising trend was reversed within a day and closed at US$4.75 that day, down 20% from the opening price.

One of the reasons for the sharp fluctuations in Ebang International's stock price may come from a business order from China Telecom. According to the Science and Technology Innovation Board Daily, Ebang International's wholly-owned subsidiary won a 369 million yuan order from China Telecom for a general 1G PON government and enterprise gateway for telecommunications equipment.

The communications business was originally the main business of Ebang International when it was first established in 2010. Six years later, the company turned to the production and research of Bitcoin mining machines, just in time for the Bitcoin bull market in 2017. It was for this reason that it quickly stood on the same playing field with Bitmain and Canaan Creative, becoming one of the three giants of mining machine manufacturers.

On June 26, Ebang International landed on the Nasdaq, becoming the second blockchain stock to be listed on the US stock market after Canaan Creative. Canaan's 80% drop in price less than a year after its listing has revealed the capital market's indifference to Bitcoin mining machine companies. Ebang International also failed to break the situation and also suffered the dilemma of falling below the price on the first day of listing.

This time, the wholly-owned subsidiary of Ebang International won the bid for China Telecom, which seemed to reveal the mining machine manufacturer's intention to return to the communications business. Unfortunately, the capital market did not give a positive feedback.

Yibang's share price surges 74% after winning China Telecom's bid

"I was actually the one who promoted Yibang." At 10 pm Beijing time on the 14th, cryptocurrency investor Cindy (net name) joked in her circle of friends. One day ago, she had just recommended Yibang International in a community.

When Cindy posted this message on WeChat Moments, the U.S. stock market had been open for less than an hour, and EBON's stock price rose from an opening price of $6 to $7. An hour later, it soared to $8, setting a record high and a 74% increase from the previous day's closing price of $4.59.

Ebang International stock price trend on July 14

The reason for the huge fluctuation in the stock price was interpreted by the media as a large order from China Telecom won by Zhejiang Ebang Communication Technology Co., Ltd., a wholly-owned subsidiary of Ebang International. On July 14, the Science and Technology Innovation Board Daily reported that Ebang International, a newly listed mining machine manufacturer, won a large order from China Telecom worth 369 million yuan (excluding value-added tax). The winning project was a common 1G PON government and enterprise gateway for telecommunications equipment, and the final supply volume was subject to the actual order.

Unfortunately, the tornado-like rise of Ebang's stock price did not stabilize at its highs. After reaching a high of $8, it fell rapidly like a tornado. On the same day, Ebang's stock price closed at $4.75, almost halved from its highest point, and returned to below the issue price of $5.23.

Ebang International is a newcomer in the U.S. stock market. On June 26 this year, the company was listed on the Nasdaq Stock Exchange in the United States as expected, becoming the second mining machine stock after Canaan Technology.

Public information shows that Ebang International issued 19.3236 million Class A common shares in this IPO, raising approximately $100.75 million, with a total market value of $685 million and an issue price of $5.23. However, the company's stock price fell as soon as it went public, with an opening price of only $4.6, down 12.05% from the issue price, and closed at $5.

The dismal stock price performance once again reveals the capital market's indifference to mining machine manufacturers. Externally, there is a capital winter, and internally, there is business lag. At this stage, Ebang International, which produces and develops Yibit mining machines, cannot catch up with its peers in terms of product iteration.

At present, the mainstream mining machines on the market mainly come from Bitmain and the emerging company MicroBT. According to the data of popular mining machines in F2Pool, among the top 10 mining machines in terms of revenue, 5 models are from Bitmain and 4 models are from MicroBT.

Among Ebang International's mining machines, the most profitable is the Ebit E11++. On July 15, when the price of Bitcoin was temporarily reported at $9,200, the electricity cost of the Ebit E11++ accounted for 77%, the power consumption was 1980W, and the daily profit was $0.7. This profit is still at the level of the previous generation mining machine Antminer S17 produced by Bitmain.

The stock price performance of Canaan Inc. (CAN) has verified that the capital market is not optimistic about mining machine companies. In November last year, Canaan Inc. was listed on the Nasdaq with an issue price of US$9. After breaking the issue price on the same day, it continued to fall within 8 months. As of July 15, the stock price was only US$1.84, a drop of 80% from the issue price.

Now, the decline of the “first stock” has begun to spread to its peer Yibang International.

Can returning to the communications business save the stock price?

In the dilemma of being attacked from both inside and outside, the large orders received by Ebang International's subsidiary in the field of communications only stimulated the stock price for a short time. The outside world is also speculating whether Ebang International will return to its old business and enrich its business structure to restore the stock price decline.

According to the prospectus of Ebang International, Ebang's communication business is concentrated in the access layer, mainly providing end users with entry points for telecommunications network interfaces, including the sales of fiber-optic communication access equipment and enterprise converged terminals. According to media reports, Ebang's revenue from communication business was US$2.5 million last year, but this part of revenue only accounted for a small part of its total revenue, and its main revenue still came from mining machine production and research.

This time, Yibang International's subsidiary won the bid for China Telecom's order of 369 million yuan. If Yibang can deliver all the products according to the agreement and get 369 million yuan, the telecommunications business revenue of this order will undoubtedly be greatly increased compared with last year's 2.5 million yuan.

In fact, communications itself is the origin of Ebang International. In 2010, when Dong Hu, chairman of Ebang International, founded the company, he was engaged in the communications business. The company was listed on the New Third Board in China with this as its main business. At that time, Bitcoin was only one year old, and mining only required a personal computer. There was no large-scale market for integrated chip mining machines.

Ebang International official website communication business solutions

At the end of 2016, Ebang International launched its first Bitcoin mining machine. Since then, it has caught up with the cryptocurrency bull market brought by Bitcoin in 2017. The demand for Ebit E10 has increased significantly, and its sales performance has been outstanding, which has immediately brought Ebang International into the top three mining machine manufacturers.

The prospectus shows that after experiencing the bull market in 2017, Ebang International's total revenue was still US$319 million and US$109 million in 2018 and 2019. As for the reason for the decline in revenue in 2019, Ebang International explained that the price of Bitcoin fell, and the sales volume of mining machines and mining revenue decreased.

Of the above total revenue, in 2018 and 2019, the revenue from its telecommunications business accounted for only 1.2% and 3.1% respectively, while the mining machine business accounted for 96.3% and 82.4% respectively. Judging from the data, the proportion of revenue from the telecommunications business has increased, but compared with the revenue from the mining machine business, the proportion of revenue from the telecommunications business is still insignificant.

Interestingly, so far, on the official website of Ebang International, the communications business is ranked first, and the product solutions provided by the company are all related to communications. The Yibit mining machine, which has contributed a lot of revenue to Ebang, is ranked last in the introduction column.

After going public, Ebang International is still focusing on the mining machine business. The purpose of the funds raised in the prospectus is also stated to increase investment in ASIC chips and blockchain technology, and continue to develop and provide cutting-edge cryptocurrency mining machines. There is no mention of the expansion of the communications business.

At least at this stage, Ebang International is still focusing on Bitcoin mining machines. Unfortunately, this business is not favored by capital and has no advantages over peers. The 360 ​​million yuan telecommunications order is only a short-term stimulant for the stock price. If Ebang adjusts its main business direction in the future, the original fundraising purpose may be questioned by capital. As for whether it can use its old business to save the stock price, the market still needs to wait and see.

Interaction time

Why do you think mining machine manufacturers cannot gain a foothold in the stock market?