The past and present of Bitmain: Is 26-year-old Ge Yuesheng the early founder of Bitmain?

Abstract: Bitmain's domestic subsidiary Beijing Bitmain has made structural adjustments, with Zhan Ketuan becoming the sole director and Wu Jihan becoming the supervisor. We believe this indicates that Zhan Ketuan has integrated the operating rights of Bitmain's domestic business, but at the level of the listed entity's board of directors, Wu Jihan and Ge Yuesheng still maintain their respective roles. But by examining the past and present of Bitmain, we actually have a bold guess that the 26-year-old Ge Yuesheng is the earliest founder of Bitmain? As time goes by, Zhan Ketuan firmly grasps the controlling rights of Bitmain, while Wu Jihan becomes more and more important and becomes the second largest shareholder, and Ge Yuesheng's role begins to weaken. Wu Jihan only actually invested 10,000 yuan in Beijing Bitmain, and finally got 20% of the shares and 33% of the voting rights before listing. If calculated based on the valuation of the last round of financing before listing of US$14.4 billion, Wu Jihan's equity value is as high as US$2.9 billion, while Zhan Ketuan's equity value is US$5.2 billion.

Yesterday, everyone was flooded with news that several directors of Bitmain had withdrawn and Wu Jihan had been appointed as a supervisor. Fans have asked us to investigate the matter. Without further ado, let me first give the conclusion: Xiaohan is indeed no longer a director of Bitmain's (officially named Bitmain Technology Holdings Company, incorporated in Cayman, hereinafter referred to as Cayman Bitmain) domestic wholly-owned subsidiary (Beijing Bitmain Technology Co., Ltd., hereinafter referred to as Beijing Bitmain), and has been appointed as a supervisor. The only director of the company is Bitmain's largest shareholder, co-founder and co-CEO Zhan Ketuan. All other directors and supervisors of Beijing Bitmain have withdrawn from the ranks of senior executives. Of course, Beijing Bitmain controls all of Bitmain's actual business in China. This adjustment has enabled Zhan Ketuan to integrate the operating rights of Bitmain's domestic business, but at the level of the listed group, Wu Jihan is still the co-CEO, and Ge Yuesheng is still the executive director and senior investment director (assuming that the content of the prospectus issued in late September remains unchanged, which should be more likely, because if there are personnel changes in the senior executives of the listed entity, it is likely that additional documents will be required, which will prolong the listing process).

It is easy to understand why Zhou Feng withdrew from the board of directors, because he had already withdrawn from the shareholders of Beijing Bitmain (which will be discussed later), while Zhao, Ge, and Hu are likely to have very limited voting rights because they are not B-share shareholders of Bitmain's listed entity. According to Bitmain's IPO application documents, except for a few major matters, the voting rights of each Bitmain B share are ten times the voting rights of each Bitmain A share.

In the above list of shareholders, Oceanic Summit Holdings Limited is the entity used to hold Bitmain’s equity incentive plan.

Bitmain’s equity structure before its IPO was as follows:

Considering that only Jihan Wu and Zhanketuan hold B shares, and everyone else holds A shares, if we examine the voting rights except for a few major matters, we will find that Jihan Wu is the actual controller of Bitmain, and the voting rights of Zhanketuan and Jihan Wu are close to 93%.

In our detailed investigation, we found many interesting things. First, let's look at the position of Beijing Bitmain in the overall Bitmain.

From the above picture, we can see that Beijing Bitmain is the only domestic entity of Cayman Bitmain, and it also holds 100% of a series of domestic companies, including Suanfeng Technology, which sued Shenzhen Bit Microelectronics (Shenma Mining Machine) for patent infringement and lost the first instance.

In addition to Beijing Bitmain, Cayman Bitmain also has five overseas entities in Israel, Seychelles, Hong Kong (Beijing Bitmain's parent company), Singapore and the United States. Bitmain's overseas mining farms and investments should be distributed among these overseas entities. But there is no doubt that Beijing Bitmain is still the most important operating entity of Cayman Bitmain, and most of its business is still in Beijing Bitmain.

So what is the situation with Bitmain in Beijing?

From the Beijing Industrial and Commercial Information, we can see that Beijing Bitmain was established on October 28, 2013. The legal representative is Zhan Ketuan. The registered capital is RMB 11,111,111, and the paid-in capital is about RMB 2,056,000. Of course, some people will ask why there is a difference between the paid-in capital registered with the Industrial and Commercial Bureau and the paid-in capital in the company's official form. This is because the new industrial and commercial registration system has deleted the paid-in capital column, so the latest updated figures must be based on the company's official figures.

So what happened on November 7? We can see from the business records that Zhao Zhaofeng, Ge Yuesheng, Wu Jihan and Zhou Feng are no longer directors, and Wu Jihan has been appointed as a supervisor, replacing Hu Yishuo.

So who are these people? We checked the credit information disclosure report of Beijing Bitmain and found that these people are the founding shareholders of Beijing Bitmain. The well-known Xiaohan is not the founding shareholder of Beijing Bitmain.

The subscribed capital of Beijing Bitmain when it was founded was RMB 1.25 million. Except for the RMB 740,000 paid by Zhan Ketuan on February 17, 2014, the other shareholders' capital was paid on December 30, 2013. Therefore, the company's capital at the end of 2013 was actually RMB 510,000, and RMB 1.25 million was fully paid on February 17, 2014. At this time, the equity structure of Beijing Bitmain was as follows:

Interestingly, Ge Yuesheng had just obtained a bachelor's degree in business administration from Hangzhou Dianzi University at the age of 21, and was working as an analyst at Shanghai Aowen Venture Capital Management Co., Ltd.

At the end of 2013, Beijing Bitmain's total assets were 560,000 yuan, total liabilities were 90,000 yuan, net assets were 470,000 yuan, revenue was 0, and net loss was 40,000 yuan.

At the beginning, the chairman, manager and legal representative of Beijing Bitmain was Ge Yuesheng, who was only 21 years old. Perhaps because Zhan Ketuan’s 740,000 yuan shareholder payment was not received until January 14, 2014 (the actual paid-in capital date of the industrial and commercial registration was earlier than February 17 of the credit information formula), Beijing Bitmain changed the chairman and legal representative to Zhan Ketuan on the same day, while the manager was still the young Ge Yuesheng, and the other original shareholders were all directors.

So what was Xiaohan doing at that time? According to our inquiry, on November 18, 2013, he established an exempted limited company named BitMain Technologies Holding Company in Cayman. Its Chinese name is BitMain Technology Holding Company, which is the Cayman company and BitMain listed entity mentioned in this article. The authorized share capital is US$50,000, divided into 500 million shares, with a par value of US$0.0001. The company had two shareholders at the time, Successful Cool Limited established in Seychelles and Reid Services Limited-Cayman established in Cayman, with Wu Jihan as a director. According to the prospectus, Successful Cool is wholly owned by Wu Jihan, and on November 18, 2013, the company held 1 common share of the Cayman company. Reid Services Limited-Cayman has a stake in many other companies established in Cayman, so we speculate that this is a special intermediary service agency that helps clients establish various shell companies and holds some shares in the initial stage to facilitate clients to change the equity structure in the future.

Wu Jihan did not officially join Beijing Bitmain until November 2014, investing 10,000 yuan to hold 1% of Beijing Bitmain's shares. The registered capital of Beijing Bitmain also increased from 1.25 million yuan to 1.26 million yuan.

In July 2015, Beijing Bitmain experienced an important personnel adjustment. The young Ge Yuesheng resigned from the position of manager and became a director, while Zhan Ketuan took on management responsibilities for the first time as the chairman and concurrently served as a manager. The original founding shareholder and director Hu Yishuo was changed to a supervisor, and Xiaohan had just become a director of Beijing Bitmain, which was half a year after he joined Beijing Bitmain.

Why did Xiaohan join the board of directors of Beijing Bitmain at this time? This may be closely related to Beijing Bitmain's capital increase and share expansion in June 2015 (from 1.25 million yuan to 10 million yuan, but after the capital increase was completed, the paid-in capital was still only 1.26 million yuan, and only Zhan Ketuan paid an extra 10,000 yuan) and the readjustment of the shareholder structure.

We noticed that Zhou Feng, the original shareholder of Bitmain, had disappeared from the list of shareholders at this time, although he was still a director. Although all shareholders were given the opportunity to participate in the capital increase and share expansion, it was clear that everyone had different opportunities. It was at this time that Xiaohan established his position as the second largest shareholder of Bitmain, with his equity ratio jumping from 1% to 23%. Zhan Ketuan's equity ratio rose slightly by 2 percentage points, while Ge Yuesheng's equity ratio dropped sharply by 23 percentage points, while Zhao Zhaofeng and Hu Yishuo's equity ratios remained unchanged. From the establishment of Beijing Bitmain in October 2013, Ge Yuesheng served as chairman and manager, and was the company's second largest shareholder for quite a long time. Until Ge Yuesheng resigned as manager of the Beijing company in July 2015, Ge Yuesheng seemed to have played a very important role in the early days of Bitmain. It seems not an exaggeration to say that he is the earliest founder of Bitmain.

At this time, Beijing Bitmain changed its business scope and added two business areas: technology import and export and agency import and export.

From October to November 2016, Bitmain reorganized both domestically and overseas. On October 26, the Cayman company (listed entity) overseas distributed shares to Micree Zhan, Jihan Wu, Zhao Zhaofeng, Ge Yuesheng, Hu Yishuo and Song Wenbao. Successful Cool Limited, a Cayman company shareholder wholly owned by Jihan Wu, which we mentioned earlier, transferred one common share to another company wholly owned by Long Short Investment Corporation. According to Bitmain's prospectus, only Micree Zhan, Jihan Wu and Ge Yuesheng are still on the board of directors of the listed entity of Beijing Bitmain. According to the description of the time of joining the group (Cayman company), Micree Zhan entered the shareholding after Jihan Wu founded the Cayman company, while Ge Yuesheng did not start holding shares in the Cayman company until December 2014.

After penetrating the relevant companies, the equity structure of the Cayman company is as follows. This is also the first time that Song Wenbao has entered the list of shareholders:

At the same time, Beijing Bitmain reorganized, cleared out all the shares of natural person shareholders, and transferred 100% to the Cayman company. This was also the starting point of Bitmain's overseas financing plan.

Peter Holm became a shareholder of Beijing Bitmain just a dozen days earlier than this round of restructuring.

According to Linkedin information, Peter Holm is an integrated circuit designer of Bitmain. A new designer directly obtained a 10% stake in Beijing Bitmain, which shows how much Bitmain values ​​Peter Holm. Peter Holm obtained a 10% stake in Beijing Bitmain with a subscribed capital of 1.11111 million yuan, and the registered capital of Beijing Bitmain also expanded from 10 million yuan to 11.11111 million yuan, and other original shareholders were diluted in the same proportion. Due to the investment of foreign natural person Peter Holm, the company type of Beijing Bitmain was changed from a limited liability company (natural person investment or holding) to a limited liability company (Sino-foreign joint venture). Before this round of reorganization, the equity structure of Beijing Bitmain had become as follows:

After Beijing Bitmain completed its reorganization on November 28, 2016, all the aforementioned natural person shareholders withdrew, and the shareholder was changed to Bitmain Technologies Limited (a wholly-owned subsidiary of a Cayman company) established in Hong Kong on January 10, 2014, namely Bitmain Hong Kong, and the company type was changed from a limited liability company (a Sino-foreign joint venture) to a limited liability company (wholly owned by a Taiwanese, Hong Kong, and Macau legal person). The positions of chairman, director, manager, and supervisor remained unchanged, and Peter Holm did not become a senior executive.

After Bitmain Hong Kong acquired full control of Bitmain Beijing, it increased its actual investment from 1.26 million yuan to 2 million yuan in November 2016, and increased it to 2.0557 million yuan on August 25, 2017, and has remained unchanged since then.

On October 11, 2017, Beijing Bitmain changed its business scope again, changing "engaging in wholesale of electronic products" to "selling self-developed products."

Just after Bitmain completed its domestic and overseas structural reorganization in the fourth quarter of 2016, Bitmain received a $50 million Series A investment at a valuation of $1.1 billion in August 2017, a $293 million Series B investment at a valuation of $12.4 billion in June 2018, and another $442 million Series B+ investment at a valuation of $14.4 billion in August 2018. Based on the valuation of the B+ round, the equity values ​​of the five founding shareholders, Zhan Ketuan, Wu Jihan, Zhao Zhaofeng, Ge Yuesheng, and Hu Yishuo, are $5.2 billion, $2.9 billion, $900 million, $600 million, and $600 million, respectively. The equity value of Song Wenbao, a new shareholder who entered in November 2016, is $100 million. The equity incentive plan established by Bitmain is worth as much as $2.9 billion. However, the investors in the A, B, and B+ rounds all invested in preferred shares, while the original shareholders of the company and the equity incentive plan all held common shares. This means that the repayment order of the investors in the A, B, and B+ rounds is before the original shareholders of the company and the equity incentive plan.

According to the B+ round valuation, the investment of Series A preferred stock investors has been 13 times the original investment, and they have obtained rich returns, while the floating profit of Series B preferred stock investors is 17%.

When we look back at the past and present of Bitmain, we can't help but sigh that no business is easy. What will this world-leading mining machine company that survived the last round of Bitcoin winter be like after the next machine replacement war? We will wait and see.