Bitmain has a plan for its failed IPO

The past that had been forgotten was brought up again.

Today, a reporter from Shared Finance saw on the Hong Kong Stock Exchange website that in the "No Progress in Hearing" column, Bitmain appeared in the updated list with an "invalid" status, announcing its failure in this listing.

The end of Bitmain's IPO in Hong Kong means the failure of the three major domestic mining machine manufacturers. It also means that, for now, the mining machine industry, which has suddenly become rich, cannot be recognized by the Hong Kong Stock Exchange in terms of supervision or profitability sustainability.

Next, facing the dividend era that has passed, Bitmain made a new choice.

Bitmain’s historical performance

On September 26, 2018, Bitmain (BITMAIN), the world's largest mining machine manufacturer, submitted its prospectus to Hong Kong.

Before this, people's impression of Bitmain was still "mining tyrant", "mysterious unicorn", "valued at tens of billions of dollars", "rapid development", etc. The appearance of the prospectus further confirmed the arrogance of the industry's hegemony.

The prospectus shows that the company, which was established only five years ago, has seen its revenue grow exponentially since 2015. From 2015 to the first half of 2018, Bitmain's adjusted after-tax profits were US$48.6 million, US$113.6 million, US$952.5 million and US$952.2 million, respectively.

Especially in the first half of 2018, when the entire cryptocurrency market was at its peak, Bitmain experienced a complete explosion during this period.

Data shows that Bitmain's total revenue in the first half of 2018 was as high as US$2.845 billion, and its gross profit reached US$1.03 billion. Compared with the whole year of 2017, the gross profit increased by 770.5%.

In addition, Bitmain, which benefited from the mining machines, also began to pay attention to the research of AI chips. At that time, in order to develop chips, Bitmain spent as much as $1.476 billion on processing fees and raw material costs (mainly chip manufacturing and packaging and testing costs), accounting for half of its half-year revenue.

It is worth noting that the prospectus clearly stated that although Bitmain has the intention to shift to AI chips, for Bitmain, cryptocurrency is still recognized as the main income in its profit and loss.

However, even for such a mining giant with a brilliant track record, the process of listing and fundraising is long and difficult to succeed.

Expected failure

Just after submitting the prospectus, all kinds of news began to sweep Bitmain, including a sharp drop in currency prices, an uncertain future, layoffs, discord among senior management, and a change of CEO.

Previously, according to information leaked during Bitmain's Pre-Pro financing in 2018, data at the time showed that Bitmain's revenue in the first quarter of 2018 was $1.87 billion, and its net profit exceeded $1.14 billion. However, in the prospectus, Bitmain's net profit in the first six months of 2018 was only $950 million, which means that although Bitmain had revenue of $975 million in the second quarter, it actually lost about $200 million.

The reasons for this are, on the one hand, the shrinking sales of mining machines, and on the other hand, the depreciation of BCH, which is deeply tied to Bitmain.

In November 2018, the BCH hard fork occurred, and the fight between Wu Jihan and CSW caused an earthquake in the cryptocurrency circle, further accelerating the process of the cryptocurrency bubble bursting.

In the same month, the business information of Beijing Bitmain Technology Co., Ltd. changed. Zhao Zhaofeng, Ge Yuesheng, and Zhou Feng, who were formerly directors, withdrew, and Hu Yishuo, who was formerly the supervisor, withdrew. After the change, the legal representative of Bitmain, Zhan Ketuan, served as the executive director and manager, and Wu Jihan remained as the supervisor.

In December 2018, the avalanche of Bitcoin led to the "mining machines being sold by the pound". At the same time, news of Bitmain's layoffs began to spread. Not only that, but also rumors of lawsuits caused by the hash rate war, and the simultaneous resignation of Jihan Wu and Zhan Ketuan as CEO, etc., were also rampant.

As time passed to 2019, Canaan Creative and Ebang International failed to go public one after another, and Bitmain, which remained silent under Blizzard, became less and less favored.

Subsequently, Hong Kong Exchanges and Clearing Limited (HKEX) Chairman Li Xiaojia also stated that (the three cryptocurrency miners) did not meet the core principle of “listing suitability” of the HKEX.

That is, whether it is the mining machine business that previously attracted money or the AI ​​business that they wanted to transform, the three cryptocurrency mining machine manufacturers could not meet the "listing adaptability" proposed by Li Xiaojia. This means that Bitmain and other three mining machine manufacturers were rejected from the Hong Kong IPO.

It can be seen that as the price of the currency falls, any operation of Bitmain in the bear market will attract criticism from many media, and the gloom of "the end of the mining tyrant" always lingers over Bitmain. All of this urges Bitmain to make changes as soon as possible.

Change of leadership and focus

Also today, perhaps in response to the failure of the IPO, or perhaps to set a new tone for the upcoming fifth anniversary, Bitmain issued an internal letter.

During this period, the adjustments to the leadership, the future development direction and the confidence in the comeback through listing were confirmed.

According to an internal letter, Wang Haichao will serve as the company's CEO, Zhan Ketuan will continue to serve as the company's chairman, and Wu Jihan will continue to serve as the company's director.

The letter disclosed that the new CEO Wang Haichao had served as head of multiple departments at Bitmain and made significant contributions to the company’s supply chain capacity expansion in 2017.

Not only that, the internal letter also stated that Bitmain has re-examined 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 this; establishing Antminer, Suanfeng chip, AI computing power, Ant Mining Pool, BTC.COM, self-operated computing power and other business lines.

In addition, Bitmain has 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 same employee may have just finished the project of developing mining chips yesterday, and can go to reinforce the AI ​​project tomorrow.

This move by Bitmain means that Bitmain has completely clarified its future development direction and wants to lighten its load while cutting off a large number of marginal businesses. According to Bitmain, they will invest all their human, material, financial and cultural resources to focus on the two markets of digital currency and artificial intelligence and develop computing chips.

In fact, as early as the end of January this year, Bitmain released its first statement of the year.

At that time, Bitmain decided to reasonably optimize its business scope. Bitmain admitted that there were indeed some problems in its business expansion without a clear understanding of the market development situation.

2020 is the time to make choices. We began to optimize our business, streamline processes, and refocus on the core businesses and activities that best reflect our vision. "Bitmain said.

Facts have proved that the crude and primitive capital power generated by the dividends of the times is like flowers in the mirror and the moon in the water. If changes are not made in time, the easily accumulated wealth tide will quickly fade away.

At present, Bitmain, which has experienced the cold winter, still has the strength to fight. With sufficient funds, whether Bitmain can complete the transformation and restart the listing work in the future will be a topic that all blockchain practitioners will continue to pay attention to.