With a loss of 370 million in two years and preparing to open an exchange, is Ebang International's fate hanging by a thread as it switches to U.S. stocks?

On April 24, Yibang International officially submitted an IPO application to the US SEC, planning to be listed on the New York Stock Exchange or Nasdaq, and intends to raise US$100 million.

This is the third time that Ebang International has made an impact on the capital market. Previously, Ebang International failed twice in the Hong Kong Stock Exchange due to its failure to meet the "listing suitability principle" and multiple lawsuits.

This time, with its competitor Canaan Creative being accused of fraud by short-selling institutions and Chinese stocks facing a crisis of trust, Ebang International's decision to insist on listing in the United States may also face an uncertain future.

Why is Yibang in a hurry to go public?

Under the current harsh environment, going to the United States for an IPO is the worst time.

But Yibang International's desperate effort was forced by a difficult reason: it was extremely short of money.

Its prospectus shows that Ebang International's revenue in 2018 and 2019 was US$319 million and US$109 million, respectively, and its net profit was a loss of US$11.81 million and US$41.07 million, respectively. Compared with its peer Canaan Creative, Ebang International's operating income in 2019 was only half of that of its peer Canaan Creative.

Moreover, Ebang International's cash flow is not sufficient. The prospectus shows that the company achieved a net cash flow from operating activities of -108 million yuan in 2018 and a net cash flow from operating activities of -13 million yuan in 2019.

Not only that, as of December 31, 2019, Yibang International had US$13.74 million in other payables and US$11.83 million in accounts payable on its books.

According to the prospectus, in the past, Yibang International mainly met its working capital needs through net cash generated from operating activities, shareholders' capital contributions and bank loans.

The current situation of declining profitability and tight cash flow makes it difficult for Ebang International’s current cash resources to meet its development needs.

Interchain Pulse observed that Canaan Creative has not released any new mining machine products for nearly a year, and its latest Ebit E12 series mining machine was released in May last year.

However, Bitmain, Shenma Mining Machine and Canaan Creative have respectively launched the 7nm mining machine Ant S19 series, the 8nm mining machine Shenma M30S and the Avalon A11 series of high-computing power mining machines in the past six months, and their power consumption ratios are lower.

However, Ebang International's Ebit E12 series mining machines are still 10nm mining machines with a computing power of 55T/s and an energy efficiency ratio of 57W/T, which can only be compared with Canaan Creative's previous generation mining machine A1066 Pro.

Although Ebang International pointed out in its prospectus that its latest 8nm and 7nm chip mining machines were designed in 2019, they have not been released to the public.

The prospectus shows that Yibang International's R&D expenses in 2018 and 2019 were US$43.5 million and US$13.4 million, respectively. In 2019, its R&D investment decreased by 69.2% year-on-year.

Due to the sharp decline in R&D investment, the performance of mining machine products lags behind that of its peers, making Yibang International’s mining machine products “unworthy of the price”.

According to the prospectus financial report data, the average sales price of Ebang International's mining machines per terabyte of computing power in 2019 was US$15, while the average price of Canaan's mining machines per terabyte of computing power was US$19.

Not only that, Ebang International's mining machine sales have also fallen sharply. Data shows that in 2018, Ebang International's mining machine sales were about 416,000 units, while in 2019 its mining machine sales fell to 290,000 units; the average selling price of a single mining machine also fell from US$737 to US$304.

The sharp decline in main business revenue has prompted Ebang International to look for new business growth points. Unlike Bitmain and Canaan Creative, which are focusing on AI business, Ebang International has set its sights on the cryptocurrency exchange business, which makes money quickly.

In its prospectus, Ebang International said it intends to establish a cryptocurrency exchange outside of China to provide cryptocurrency trading-related services to the cryptocurrency community.

At a time when the regulatory policies on cryptocurrency trading in the United States and China are still unclear, it is undoubtedly a risky move for Ebang International to hastily deploy its exchange business, which also adds more uncertainty to its ability to successfully pass the IPO.

Switching to US stocks may be a life-threatening situation

Compared with the cryptocurrency exchange business, Yibang International's listing in the United States faces greater uncertainty in that many of the prosecution cases it has encountered in the past have not yet been effectively resolved.

For example, in September 2018, Yibang International was involved in the "Yindou.com P2P bankruptcy" case. There was an unclear amount of funds of up to 520 million yuan between Yibang International and the actual controller of Yindou.com. Some victims suspected that this was an asset transfer.

In the same year, Ebang International was sued by its mining client Ma Xiaoyun. The 500 Ebit E10 mining machines that Ma Xiaoyun purchased at a cost of 13 million yuan frequently malfunctioned, with 873 units returned for repair within three months. The lawsuit between the two parties has yet to come to a conclusion.

In December last year, Zhongying Internet, an A-share listed company, issued an announcement stating that its subsidiary paid for mining machines from Ebang but did not receive the goods, and that Ebang International was suspected of contract fraud. Ebang International accused it of malicious reporting and filed a counterclaim, but the lawsuit between the two parties has not yet been resolved.

In addition to the lawsuits, another risk that Yibang International faces in choosing to go public in the United States at this time is the series of trust crises triggered by Luckin Coffee.

Since Luckin Coffee revealed its financial fraud on April 2, GSX and iQIYI have been accused of fraud by short-selling institutions. Not only that, its competitor Canaan Creative's performance quickly changed after it went public in November last year, with a huge loss of 1 billion yuan in revenue and a 70% drop in market value. It was also accused of fraud by short-selling institutions.

A series of trust crises caused by Chinese stocks listed in the United States have made Ebang International's road to listing in the United States even more murky. However, if it does not enter the capital market, facing the relentless pressure from its mining machine manufacturers, Ebang International will also be on the verge of death.