Ebang International, the third largest Bitcoin mining machine company, plans to go public in the U.S., and its gross profit turned from profit to loss last year

After two failed attempts to go public in Hong Kong, Ebang International, the world's third largest Bitcoin mining machine manufacturer, turned to the U.S. stock market.

On April 24, 2020, the U.S. Securities and Exchange Commission's official website disclosed the prospectus of Ebang International, which plans to be listed on the New York Stock Exchange or Nasdaq Global Market with the stock code "EBON" and plans to raise up to US$100 million. The net proceeds from the issuance will be mainly used for the development and introduction of new mining machines, corporate brand marketing activities, and the expansion of overseas and new businesses.

The prospectus shows that Ebang International, whose full name is Ebang International Holdings Co., Ltd., is an application-specific integrated circuit (ASIC) chip design company and Bitcoin mining machine manufacturer. Its main "mining machine" sales brand is "Yibit".

In terms of development history, Zhejiang Yibang Communication Technology Co., Ltd. was established in January 2010, mainly engaged in the production and development of communication network access equipment. In 2014, it started BPU research and development. In 2015, it was listed on the New Third Board as "Zhejiang Yibang". On March 23, 2018, it was delisted from the New Third Board and prepared for reorganization. The prospectus shows that Yibang International was founded by Chairman and CEO Hu Dong, who currently holds 41.82% of the shares.

Last year, gross profit turned from profit to loss, and net loss increased by 2.47 times

According to the prospectus, as of December 31, 2019, Yibang International's operating income in 2019 was US$109 million, a decrease of 65.8% from US$319 million in 2018; the gross loss reached US$30.6 million, while the gross profit in 2018 was US$24.4 million; the net loss was US$41.1 million, an increase of 247.46% year-on-year.

Ebang International said that its operating results were significantly affected by the fluctuations in Bitcoin prices, especially the sharp drop in Bitcoin prices. Because Ebang International's mining machines are mainly used for Bitcoin mining, the demand and price of mining machines are affected by the expected economic returns of Bitcoin mining activities, which are mainly driven by factors such as Bitcoin prices.

Data from Bitcoin.com shows that the price of Bitcoin fell from $12,619 on December 31, 2017 to around $3,859 on December 31, 2018. From January 1, 2019 to December 31, 2019, the highest price of Bitcoin was $12,806 and the lowest was $3,373.

Ebang International said that the decline in Bitcoin prices in 2018 and the first quarter of 2019 led to a sharp drop in its sales volume and the average selling price of Bitcoin mining machines. Although Bitcoin prices began to recover in the second quarter of 2019, the business generally lagged behind the rise in Bitcoin prices.

In terms of mining machine sales, the total sales volume of Ebang International's mining machines decreased from 415,930 units in 2018 to 289,953 units in 2019, and the average sales price of each mining machine decreased from US$737 in 2018 to US$304 in 2019. From the perspective of computing power, the total computing power sold by Ebang International in 2019 was 5.9725 million TH/s, a year-on-year increase of 18.00%, and the average selling price per TH/s was US$15, a year-on-year decrease of 75.41%.

In 2018 and 2019, sales of Ebang International's Bitcoin mining machines and related accessories accounted for 96.3% and 82.4% of its revenue, respectively, and revenue from providing mining machine hosting services accounted for 2.4% and 14.4% of its revenue, 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. The price of Bitcoin fell sharply in March 2020, and the new coronavirus has currently caused business interruptions and operational disruptions to Ebang International's business.

Or explore financial services and healthcare

According to the prospectus, Ebang International will expand and enrich its product range.

Yibang International said that previously the blockchain product business was the main component of its revenue, but in the future it plans to expand its business to the upstream and downstream markets of the blockchain technology and cryptocurrency industry value chain to diversify its products and achieve more stable performance.

Among them, Ebang International plans to expand mining machine hosting services and build a mining farm to provide centralized services to miners. Secondly, in the event of a market downturn, Ebang International expects to conduct proprietary Bitcoin mining by using its own mining machine inventory.

In addition, Yibang International will also explore the application of blockchain technology to non-cryptocurrency industries, such as financial services and healthcare. Yibang International stated in its prospectus that applying Yibang International's accumulated industry knowledge and operating experience to these new businesses is critical to its future business growth and prospects. However, these new businesses may have high costs, long start-up periods, and if such new businesses encounter adverse conditions, it may have a significant adverse impact on its operating results and prospects.

The third consecutive listing may become the "second mining machine stock"

In fact, before this, Yibang International had failed twice in the Hong Kong Stock Exchange.

At the end of June 2018, Ebang International submitted an application for listing to the Hong Kong Stock Exchange, but failed. According to previous reports by The Paper, there are two reasons for the failure: On the one hand, on November 1, 2018, the Hong Kong Securities and Futures Commission issued a new regulatory notice, announcing that if more than 10% of the assets of a fund are virtual assets, they can only be sold to professional investors, and any fund and brokerage institution investing in virtual assets must register with the Securities and Futures Commission. On the other hand, Ebang International was involved in a dispute with the P2P online loan "Yindou.com" involving a 4.4 billion yuan black money dispute.

On December 20, 2018, Yibang International applied for listing for the second time, but information disclosed by the Hong Kong Stock Exchange on June 21, 2019 showed that its listing was invalid.

Since then, there have been reports that Yibang International is considering listing in the US market after failing to list on the Hong Kong Stock Exchange for the second time. It was not until April 24 that Yibang International's prospectus for listing in the US was disclosed.

If the listing is successful, Ebang International will become the "second mining machine stock" after Canaan Creative, the second largest company in the industry.

On November 21, 2019, Canaan Inc. (NASDAQ: CAN), which sought to go public for the fourth time, was officially listed on the Nasdaq in the United States with an issue price of US$9 and a fundraising amount of US$90 million, becoming the world's first listed blockchain-related company.

At present, the industry leader Bitmain has not made any new progress in its listing. At the end of September 2018, Bitmain submitted a prospectus to the Hong Kong Stock Exchange. However, it did not enter the listing hearing stage within 6 months, and its listing application automatically became invalid. However, according to media reports, Bitmain secretly submitted a prospectus to the U.S. Securities and Exchange Commission (SEC) in late October and plans to complete the listing in early 2020.