Ebang International’s “obsession”: Will Ebang be the next “Canaan”?

Editor’s note: The original title is “Ebang International’s Obsession”.

Yibang International launches its third attack on the capital market!

Yesterday, it was reported that on April 24, Ebang International had submitted a prospectus to the U.S. Securities and Exchange Commission (SEC), hoping to raise up to $100 million through an IPO. Ebang International plans to be listed on the New York Stock Exchange or Nasdaq with the stock code EBON. AMTD Global Markets and Loop Capital Markets are the joint bookrunners for the transaction, and did not disclose pricing terms.

According to the prospectus of Ebang International, its revenue in 2018 and 2019 was US$319.0 million and US$109.1 million respectively. Its gross profit in 2018 was US$24.4 million, and its gross loss in 2019 was US$30.6 million. Its net losses in 2018 and 2019 were US$11.8 million and US$41.1 million respectively. It is obvious that Ebang's revenue has been decreasing, its losses have been expanding, and its profitability has been decreasing in the past two years. However, compared with Canaan, which loses 1 billion a year, it is still a small matter.

The reason why Ebang International's revenue has decreased is not much different from the reason for Canaan's huge losses. It is mainly due to its deep reliance on mining machine-related businesses, which is severely affected by the price of Bitcoin. In the development history of mining machine manufacturers, the status of mining machines is almost unshakable. In 2018 and 2019, Ebang International's mining machine and accessories sales accounted for 96.3% and 82.4% of its revenue, respectively, and the revenue from providing mining machine hosting services accounted for 2.4% and 14.4% of its revenue in 2018 and 2019, respectively.

In addition, Ebang International expects that Bitcoin may continue to fluctuate significantly in the future due to the impact of the new coronavirus, which may have a significant adverse impact on its operating performance and financial condition. Currently, the new coronavirus has caused business interruptions and operational disruptions in Ebang International's business.

It is worth mentioning that in 2019, overseas business revenue accounted for 12.5% ​​of Ebang International's total revenue, which is still on the rise compared to 8.6% in 2018. The increase in overseas business revenue means that Ebang International's internationalization is increasing, but this brings more challenges and risks to its development.

Canaan and Bitmain have both begun to explore artificial intelligence business in addition to mining machine business, in order to diversify the company's business and enhance profitability. Ebang International also stated that it is ready to explore the application of blockchain technology in non-cryptocurrency industries, such as financial services and healthcare industries in the future.

01 Two listings in Hong Kong ended in failure

In fact, the three major domestic mining machine manufacturers have been constantly impacting the traditional capital market, but the road to listing for each company is full of ups and downs. Canaan Creative, also based in Hangzhou, finally went public in the United States last year, which may have given Ebang International some encouragement to firmly go public in the United States.

On June 24, 2018, Ebang International submitted its first listing application to the Hong Kong Stock Exchange. A month later, the P2P platform Yindou.com was investigated for suspected illegal fundraising. However, Ebang International had large amounts of funds with Yindou.com, and it was revealed that Zhu, a person involved in the Yindou.com case, was a shareholder of Ebang International's parent company.

According to media reports at the time, the huge amount of funds was suspected to be used to inflate Yibang International's sales revenue to help it successfully list in Hong Kong. Although Yibang International firmly denied this, Yibang International, which was involved in a huge illegal fund-raising case, had its hopes of listing in Hong Kong dashed.

On December 20, 2018, Ebang International submitted a new draft IPO application to the Hong Kong Stock Exchange again, and did not give up the attempt to go public. In the submitted prospectus, it can be seen that as of June 30, 2018, Ebang International's revenue exceeded 2.1 billion yuan and its profit was 932 million yuan, which was 8 times that of the same period in 2017. In this regard, the results are very impressive, but the financial situation in the third quarter was not disclosed. Because the crypto industry is in a bear market, Ebang International's financial situation is indeed not optimistic.

Six months later, checking the official website of the Hong Kong Stock Exchange, Yibang International's listing application had been classified as "invalid", and its listing process ended in failure again.

In June 2019, Ebang International stated that it had considered listing in the US market. It was not until Canaan Creative successfully listed in the US that Ebang International announced the news of its upcoming listing in the US shortly afterwards.

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