On the eve of the expiration of the Hong Kong Stock Exchange's listing application, on March 26, Bitmain CEO Wang Haichao, together with two co-founders, Zhan Ketuan and Wu Jihan, issued an important internal letter.

Not only did they officially announce Wang Haichao as the company's CEO, but they also re-examined the company's business, focusing on digital currency and artificial intelligence chips. They also frankly stated, "Our current round of IPO application will expire in the near future. In the future, we will restart the listing work at the appropriate time."

Over the past six months, Bitmain has been shrouded in rumors of "layoffs", "executive changes", and "failed IPO". Now, Bitmain has personally cleared the fog and steered this giant ship back to the main channel.

The old consensus has collapsed, and the new consensus has not yet been formed. In the era of blockchain full of uncertainties, Bitmain's road to listing and its way of survival have taught market participants to pay attention to timing and adjust their focus.

The overall environment drags down the timing of unicorn listing on the Hong Kong Stock Exchange

As a unicorn in the digital currency field, Bitmain's every move has attracted much attention since it submitted its prospectus to the Hong Kong Stock Exchange in September last year. According to the relevant regulations of the Hong Kong Stock Exchange, if the IPO application does not enter the listing hearing stage within six months after submission, it means that the listing application is invalid, but the applicant can still resubmit the application after three months.

In fact, Hong Kong stocks may not be the best choice for Bitmain. In the past year, the cryptocurrency market has fallen sharply, and Hong Kong stocks are not to be outdone. At present, many mainland listed companies that listed on the Hong Kong stock market in 2018 have seen a huge drop in share prices, and even star companies such as Huifu Tianxia, ​​51 Credit Card, and Inke have not escaped the fate of being cut in half.

According to China Securities Journal, as of the end of 2018, of the 208 companies listed in Hong Kong that year, 111 companies’ closing prices fell below the initial public offering price, with a break-even rate of 53.37%. Among them, of the 86 companies registered in the mainland, 58 had the latest closing prices lower than the issue price, with a break-even rate of 67.44%. Listing and break-even will undoubtedly have a huge negative impact on subsequent public market financing and corporate confidence.

Behind the wave of broken IPOs is the overall economic downturn. Under the cyclical economic adjustment, the traditional primary and secondary markets and the digital currency market cannot escape the value correction.

Some traditional Internet companies have also slowed down their pace of listing in Hong Kong under this environment.

Under the pressure of Hong Kong stocks breaking the issue price, it is not worthwhile to "bleed" in exchange for the opportunity of listing and financing. Listing at this time is not a good thing for Bitmain. Moreover, Bitmain also stated in an internal letter that the company currently has sufficient cash and the supply chain is operating normally.

Now, Bitmain has temporarily suspended its listing process and will restart the listing process when the time is right. However, in addition to the long waiting time for the listing application, Bitmain also submitted materials such as corporate financial audits, asset evaluation reports, the review opinions of the sponsoring institution, stock issuance plans and announcements. After going through all the procedures, Bitmain's corporate governance is undoubtedly more transparent and standardized.

The policy environment for blockchain companies to go public is not yet mature

An investment banker analyzed to PANews that in the absence of current policy support, it is very difficult for blockchain-related companies to go public. There is basically no precedent for IPOs for mining machine companies, whether in the US or Hong Kong stocks.

In an interview with Tencent News at the Davos Forum in January, Hong Kong Exchanges and Clearing Limited (HKEX) CEO Charles Li Xiaojia said that the core principle of HKEX is "listing suitability" and whether external supervision is expected to undergo major changes, which has closed the door to listing for mining machine manufacturers. In fact, the HKEX's "listing suitability" principle has not yet been clearly defined, and there is no top-level policy design for blockchain, an emerging industry.

This can't help but remind people that six years ago, Alibaba was rejected by the Hong Kong Stock Exchange due to its dual-class share structure. At the end of 2017, when the Hong Kong Stock Exchange revised its policy to allow dual-class share structure, it may have regretted it and missed the giant Alibaba.

In fact, it is not only in the country that blockchain companies have difficulty going public.

As early as the end of 2017, Asiff Hirji, president of the US digital currency exchange giant Coinbase, revealed his intention to apply for an IPO, saying bluntly that "going public is the most likely path for Coinbase in the future." In November last year, in response to rumors that Coinbase planned to apply for an IPO in the United States, Coinbase's chief operating officer responded to Bloomberg that "Coinbase will not conduct an IPO in the short term."

Similarly, Bitfury, a mining machine manufacturer, also considered IPO as one of the strategic options for raising funds and planned to apply for IPO in 2019. However, it raised funds in November last year. Its chief operating officer John Mercurio said in an interview that the final decision on whether to conduct an IPO has not yet been made.

Whether it is an IPO or a backdoor listing, there are only a few successful ones, and even if they are listed, they may not be favored by investors at this time.

Galaxy Digital Holdings, which successfully went public through a backdoor listing in Canada, plummeted 20% shortly after its listing in November last year. Canadian securities regulators once requested that the stock be suspended from trading during the trading session and asked the company to clarify whether there was any undisclosed information.

The road to listing for digital currency-related companies can be described as bumpy. The changing economic environment and the lack of top-level systems have made the route foggy. The moment when the clouds clear and the sun appears is when the time is ripe.

Adjust strategy according to the situation

At the beginning of this year, photos circulated online showing Wu Jihan with a full beard, hugging Zhan Ketuan and crying, and taking photos with his colleagues at the Bitmain annual meeting. I guess Bitmain was experiencing internal pain at that time, learning from its mistakes and adjusting its strategy.

When the capital market is cold, we should return to our core business and accumulate momentum.

The open letter on March 26 stated that the company will focus all its human, material, financial and cultural resources on the two markets of digital currency and artificial intelligence: focusing on computing chips. "The two huge markets will overlap in the next three to five years. High-performance, low-power computing chips are their common foundation, and this is where our core competitiveness lies."

"We have reviewed the company's business, organizational structure and management mechanism, and made corresponding business adjustments: focusing on digital currency and artificial intelligence chips and products and services based on them; establishing business lines such as Antminer, Suanfeng Chip, AI Computing Power, Ant Mining Pool, BTC.COM, and self-operated computing power. We have decentralized management authority to respond quickly to market changes and better serve customers. We have also integrated all R&D resource lines for chips, hardware and software, and digital currency and artificial intelligence products share the R&D resources after integration. In this way, the investment, delivery and quality of each project and product are better guaranteed. At the same time, engineers can also get greater training and growth in different product lines."

Bitmain's transformation and adjustment should have been brewing for a long time. As early as January 26, Bitmain revealed signs of adjustment on its official English blog. "Bitmain decided to reorganize its business at this important point at the end of 2018. The size and scale of the company's investment portfolio and business have developed to the point where we are facing a choice. Therefore, we decided to start optimizing the investment portfolio and streamlining business lines in order to refocus the company's development on the core activities that best support the company's vision."

"In the short term, Bitmain's mining machine sales will be affected by the price of digital currency assets. In the long run, the company's value is not only reflected in the sales of encrypted digital mining machines, but also in the layout of AI chips and related fields. We are very optimistic about its future." Wang Jiaping, executive director of Innovation Works, Bitmain's Series A investment institution, and vice president of the Innovation Works AI Academy, said in an interview with PANews that what initially impressed him was the Bitmain team's risk management capabilities.

Tao Yuanming once wrote: "At first it was very narrow, but only after walking a few dozen steps, it suddenly became clear." Bitmain once encountered a narrow valley, but now it seems to have suddenly become clear. And digital currency has experienced several rounds of bull and bear cycles, and those who persist will be the winners.