Bitcoin plummets, money is not clear, mining machine giants are rushing to go public and cash out

The Hong Kong Stock Exchange was very busy this year, with a large number of technology companies going public, so much so that sometimes the Hong Kong Stock Exchange did not have enough gongs, and had to gather a few companies together for a festive occasion. However, for the companies that came to go public, this was just a small episode on the way, which did not have any impact, but instead added a bit of excitement.

Amid the popularity of Bitcoin, several major domestic mining machine giants, such as Bitmain, Canaan Creative, and Ebang International, do not seem to want to miss this rare opportunity. They have recently accelerated their pace of listing, frequently running between investment banks and law firms, and are busy dealing with internal and external relations.

Preparing for listing

Earlier news showed that on August 7, Bitmain received guarantees from Tencent and SoftBank and raised another $1 billion, with the company's valuation reaching $15 billion. The industry has long believed that this round of financing is Bitmain's final preparation for listing.

An investor said that Bitmain plans to submit an initial listing application to the Hong Kong Stock Exchange on August 30 and complete the listing by the end of 2018. However, the reporter repeatedly asked Bitmain to confirm the IPO, but the other party remained silent.

According to data, Bitmain has completed two rounds of financing before: in September 2017, Bitmain received a US$50 million Series A investment from Sequoia Capital, IDG Capital and others; in June this year, it received a US$300 million to US$400 million Series B investment led by Sequoia China, with a valuation of US$12 billion.

In fact, in addition to Bitmain's all-out effort to go public, two other domestic mining machine manufacturers, Canaan Creative and Ebang International, have also long expressed their desire for the capital market.

In 2016, Canaan Creative wanted to "backdoor" Luyitong with a valuation of 3.06 billion yuan, but the final listing plan was shelved because the regulator suspected that the transaction valuation was too high. In 2017, Canaan Creative applied for listing on the New Third Board, but in the end, there was no further news. In May 2018, Canaan Creative submitted an IPO application to the Hong Kong Stock Exchange again, striving to become the first listed company in Hong Kong stocks with blockchain business as its main business. It was previously predicted that Canaan Creative's net profit in 2018 may exceed 3 billion, with an average annual compound growth rate of nearly 10 times.

Three months after being delisted from the New Third Board, Ebang International disclosed in late June that it had submitted a prospectus to the Hong Kong Stock Exchange. The prospectus showed that Ebang International made a net profit of about 380 million yuan last year, of which the blockchain business grew by 1690.3% year-on-year, becoming its largest main business.

Ding Qiong, an analyst at Guosheng Securities, said that the current market concentration of the Bitcoin mining machine industry is high, with the top few companies occupying the vast majority of the market share, and the industry competition pattern is an oligopoly. It is not ruled out that leading companies will continue to consolidate their competitive advantages through listing in the future and maintain the market oligopoly pattern.

Increased competition brings anxiety

Mining has always been a lucrative upstream link in the blockchain industry chain, and mining machine production is an extremely profitable industry. Some investment institutions predict that after Bitmain goes public, its expected valuation will be more than 30 billion US dollars, or even 35 billion US dollars. Investment bankers believe that Canaan Creative's valuation after listing is expected to hit 100 billion yuan. Even though Ebang International is slightly inferior at present, the market still gives it a valuation of nearly 20 billion.

Although the three companies have absolute market advantages, some insiders also said that these mining machine manufacturers are not having an easy time at present, "like sitting on the crater of a volcano", and it is difficult to get up and down. Especially in the face of the pressure of product iteration and business ceiling, they have to use all their tricks.

It is understood that they are currently in a race for 7nm ASIC. First, there was news in early June that Canaan Creative's 7nm special application chip (ASIC) produced by TSMC will be mass-produced in July, which is faster than Bitmain. Then on August 8, a merchant posted news online that the Ant S10 mining machine with Bitmain's 7nm chip manufactured by Foxconn will be launched soon and can be pre-ordered now, with a computing power more than twice that of the Ant S9. Ebang International, which is in the latter position, is also trying to survive in the cracks and wants to get a share of the ASIC market.

The founder of a blockchain company pointed out that the current mining machine chip competition has entered the 7nm process level, which requires huge investment. With hundreds of new companies joining the competition, the gross profit margin of the entire mining machine industry chain has dropped, and it is estimated that it will soon drop below 30%. Therefore, one reason why mining machine giants are now seeking to go public is to prepare for a rainy day in terms of funds.

In addition, transformation and development has also become a battle for major mining machine manufacturers to break through. In order to achieve sustainable development and improve their public image, mining machine manufacturers' transformation actions are mainly to enter the AI ​​chip market, but the AI ​​chip market faces fierce competition from existing market giants.

Losing faith in digital currency

The prices of cryptocurrencies such as Bitcoin rose sharply at the end of last year, but this year they are far less prosperous than last year. Among them, Bitcoin, which has received the most attention, fell to around US$10,000 in May, and fell below US$6,000 at the end of June. Although it recovered to a certain extent at the end of July and returned to more than US$8,000, the price of Bitcoin has started to decline again recently, and the market's concerns about its future price decline have gradually increased.

In the view of Goldman Sachs analysts, cryptocurrencies such as Bitcoin do not have the three traditional functions of currency, and they expect the price of cryptocurrencies to continue to fall in the future. According to Cointelegraph, the U.S. Securities and Exchange Commission (SEC) delayed the decision on the listing and trading of Bitcoin exchange-traded funds (ETFs) until September, which also triggered a plunge in the cryptocurrency market.

CITIC Securities believes that although mining machine manufacturers are upstream enterprises, as cryptocurrencies such as Bitcoin continue to fluctuate sharply, a series of chain reactions will also occur, and the mining market will be the first to bear the brunt. Faced with the constant test of the market, it has also triggered a battle of faith among mining machine manufacturers. Some investors have raised the question of whether mining machine manufacturers love cryptocurrencies more or fiat currencies more?

Obviously, the answer is self-evident. As producers of cryptocurrencies, mining machine manufacturers now have to rely on the capital market to cash out. Although they are all advocating that digital currencies are very profitable, they are secretly using the equity market to complete capital withdrawal.