Cloud computing servers on the surface, but Bitcoin mining machines behind? A-share companies selling assets at a low price set off a crypto market explosion

A bizarre asset split and sale at a low price is arousing the curiosity of the cryptocurrency circle about Huatie Technology's cloud computing server leasing business. Various clues seem to suggest that Huatie Technology is the largest Bitcoin mining giant in the A-share market. However, there is no clear proof of all this, and it is just speculation in the cryptocurrency circle.

Huatie Technology, which is on a tear, will hold its annual shareholders' meeting today. One of the rather mysterious proposals - "On the equity transfer and provision for asset impairment of Xinjiang Huatie Heng'an Building Safety Technology Co., Ltd. (hereinafter referred to as Huatie Heng'an)" has attracted much attention in the cryptocurrency circle.

What is very strange is that less than a year after Huatie Heng'an was established, its cloud computing server business suffered huge asset impairment, and its 100% equity has shrunk by 40 million yuan in just two months this year.

Not only is the transfer price of this transaction questionable, but Huatie Hengan has not disclosed the relevant leasing customer information of cloud computing servers, and the business logic seems to be lacking. What is more interesting is that the so-called cloud computing business actually purchased 36,500 servers from two major Bitcoin mining machine manufacturers. Is this the first street-style show of wealth in the A-share market behind this hasty equity transfer and impairment, or is there another hidden story?

Huatie Hengan was sold at a low price

In just two months, the value of the 100% equity transfer of Huatie Hengan, which owns the cloud computing server business, plummeted from 59 million yuan to 10 million yuan. The exchange also inquired about this.

On March 27, Huatie Technology once again announced the sale of 100% of Huatie Heng'an's equity, but the valuation this time was 80% lower than in January. According to the audit report, as of February 28, Huatie Heng'an's net assets were RMB 12.1 million. All parties to this agreement unanimously agree and confirm that the transfer price of the target equity is RMB 12.28 million.

Huatie Hengan is a subsidiary of the listed company Huatie Technology. Huatie Technology holds 99.5% of the shares of Huatie Hengan, and Hangzhou Yuming, a wholly-owned subsidiary of Huatie Technology, holds 0.5% of the shares of Huatie Hengan.

In January, Huatie Technology announced for the first time the equity transfer and provision for asset impairment of its subsidiary Huatie Hengan. At that time, Huatie Technology planned to transfer 100% of the equity of Huatie Hengan. According to the evaluation results of the evaluation agency, the equity transfer was also RMB 59.75 million.

Huatie Technology stated that in order to more objectively and fairly reflect the company's financial status, asset value and operating results, in accordance with the provisions of the "Enterprise Accounting Standards" and the company's relevant accounting policies, taking December 31, 2018 as the base date, it made an impairment provision of RMB 95.0306 million for Huatie Heng'an's fixed assets and a bad debt provision of RMB 2.4740 million for accounts receivable, totaling RMB 97.5046 million in asset impairment provisions for the target company.

This transaction will help optimize the company's asset structure, focus on its core business, and enhance its core competitiveness. It will not have an adverse impact on the company's main business, sustainable operating capabilities, and financial condition, and there will be no situation that harms the interests of the company and its shareholders.

This equity transfer and huge impairment occurred less than a year after the company was founded.

Huatie Heng'an is a wholly-owned subsidiary established by Huatie Technology to implement the investment project "Construction Safety Support Equipment Leasing Service Capacity Upgrading and Expansion Project" with funds raised through private placement of stocks. It has a registered capital of RMB170 million, all of which is invested from funds raised through private placement.

After that, Huatie Hengan entered the cloud computing server leasing business in 2018. The source of funds for Huatie Hengan's cloud computing server leasing business is loans from its parent company Huatie Technology to Huatie Hengan.

In order to facilitate the overall package sale of cloud computing servers and other related businesses and the effective continuation of the implementation of Huatie Heng'an's fundraising and investment projects, on December 21, 2018, Huatie Technology transferred Huatie Heng'an and building leasing-related assets to the company's wholly-owned subsidiary Huangshan Huatie at a book value of RMB 200 million. At this time, the company's main business became the cloud computing server leasing business segment.

Cloud computing server, or Bitcoin mining machine?

Judging from the announcement of Huatie Technology, it is difficult to understand Huatie Heng'an cloud computing server leasing business. Many people in the currency circle speculate that it is most likely a Bitcoin mining machine business.

Huatie Technology is located in Hangzhou, and its subsidiary Huatie Heng'an purchased 36,500 servers from Zhejiang Avalon Technology Co., Ltd. and Zhejiang Yibang Communication Technology Co., Ltd.

As a computer server, it is difficult to depreciate by more than half in a year, or even more, unless it is a Bitcoin mining machine. Coincidentally, the purchasers are two of the three major mining machine giants - Avalon and Ebang Technology. Public information shows that these two companies only produce mining machines and have no ordinary computer server business.

From this perspective, Huatie Heng'an cloud computing server is most likely a Bitcoin mining machine business.

This also sparked heated discussions in the cryptocurrency investment community.

In the past year, the price of Bitcoin has also been on a roller coaster trend. Huatie Hengan, which purchased 36,500 servers in June in the first half of the year, should be the happiest company.

At this time, the price of Bitcoin is above $6,000, and Huatie Hengan should be making a lot of profit. At this time, both leasing mining machines and speculating in Bitcoin are profitable.

However, starting from November 2018, Bitcoin finally collapsed, ending 2018 with a sharp drop, and the final price was fixed at US$3,500.

If it is indeed a mining machine business, one can imagine how much damage it will cause to Huatie Hengan.

The business model of leasing business is puzzling

Huatie Hengan said that the company used its own funds to purchase servers and accessories for leasing business in May and June 2018. In the third quarter of 2018, the downstream market environment was still good, and the server leasing business was operating well; in the fourth quarter of 2018, affected by the sharp decline in server market demand, according to the "Final Settlement Amount and Repayment Agreement" signed between Huatie Hengan and server leasing customers, Huatie Hengan's server leasing customers decided not to continue to perform the original leasing contract from 2019, and terminated the leasing contract in advance after negotiation. At present, the server is not rented out, and there is great uncertainty in the server leasing business.

The management of Huatie Heng'an believes that the servers and supporting equipment have shown signs of impairment and conducted impairment tests on the relevant assets on the balance sheet date. The test results showed that the recoverable amount of the assets was lower than their book value. The management determined that the relevant assets had been impaired and made an impairment provision based on the difference between the book value and the recoverable amount.

However, this can only explain the background of Huatie Heng'an's losses, but it is difficult to explain the business model of cloud computing server leasing.

According to information disclosed by the company, in 2018, Huatie Hengan generated 53 million yuan in server rental income. However, judging from the company's hosting services alone, it costs more than 54 million yuan, and it is obvious that the expenditure and income are difficult to match. Such a business is difficult to describe as a business model. Not only that, the purchase of the so-called cloud computing server also cost 200 million yuan. Didn't they calculate depreciation?

Who would engage in such an operating lease business? This business is full of doubts.

What is even more puzzling is that, unlike other operating leasing businesses, Huatie Hengan's cloud computing server leasing business does not disclose its leasing customers, while the others do.

In fact, it is easy to judge the business if there are leasing transaction details. If it is a relatively mature leasing business, the capital flow is relatively clear.

The low-price transfer of equity and the substantial impairment of assets have made the long-dormant cryptocurrency circle very lively recently. Is Huatie Technology the largest invisible mining company in the A-share market?

This is just speculation in the cryptocurrency circle, and everything still needs to be based on public information!