The three mining machine giants seek to go public, exposing two major risks to the entire market

On June 24, Bitcoin mining machine giant Ebang International submitted an IPO prospectus to the Hong Kong Stock Exchange three months after delisting from the New Third Board.

A month ago, another mining machine giant, Canaan Creative, also submitted a prospectus for listing on the Hong Kong stock market after failing in the A-share and New Third Board markets.

In addition, Wu Jihan, the founder of Bitmain, the current leader in the mining machine industry, previously told Bloomberg that Bitmain has plans for an IPO in Hong Kong or overseas.

The three giants, Bitmain, Canaan Creative, and Ebang International, currently have a market share of more than 90%, but the continued decline in the price of coins has led to a sharp drop in the market demand for mining machines. This may also be the fundamental reason why these three giants want to embrace the capital market.

The research report pointed out that the mining cost of one Bitcoin is about $8,038, including electricity costs, cooling costs of mining machines and equipment costs . According to Morgan Stanley analysts, if the price of Bitcoin is lower than $8,600, Bitcoin miners will not be profitable. Based on the price of $7,500, mining will still have a floating loss of 13%. The current price of Bitcoin is only around $6,000. When will it return to $8,000? It may take several months or even years.

There is an interesting phenomenon here. If it is said that mining is still profitable in areas with extremely low electricity prices, but in fact, a flood broke out in Sichuan recently, flooding many mining sites. Looking back at the photos of local mining sites, an important reason for the flooding is that the environment is too simple. Therefore, the above cost accounting does not include the risk cost of site management.

The market of digital currency is unpredictable, and it is even more unpredictable whether it will rain or not. In short, it feels like we are all dependent on the weather, and we can deeply feel the powerlessness of fate and future. I believe that the mine owners who were flooded this time will not buy a batch of mining machines to mine. And it is becoming more and more difficult to make money by mining Bitcoin.

The merchants who used to run computer businesses in Huaqiangbei have switched to selling mining machines, and Huaqiangbei has become the distribution center for about 90% of the world's mining machines. At the peak of the market, a Bitcoin mining machine with a shipping price of more than 30,000 yuan could be sold for 130,000 yuan, and hot-selling products like Antminer S9 were out of stock, so people could only pay a deposit to buy futures mining machines.

Unfortunately, that was when the digital currency market was good. A higher price of the currency means a higher mining yield, and the price of the mining machine will rise accordingly. Conversely, a lower price of the currency also means a plunge in the price of the mining machine .

According to merchants in Huaqiangbei, a peer once stockpiled 8,000 Avalon 741s at a high price, and each unit has lost more than 10,000 yuan so far. Avalon 741 has been discontinued, and only second-hand units are available at a market price of around 1,600 yuan, less than one-tenth of the peak period. Not long ago, the price of the Antminer Z9 mini was halved in just 20 days.

For miners, the sharp drop in currency prices means that it will take much longer than before to recoup the investment in mining machines purchased at high prices.

In fact, it has been a long time since mining machine giants have been seeking to go public. Judging from this trend, they are unsure about the prospect of continued profitability of the mining machine business. So the feeling of powerlessness about fate mentioned earlier may have been deeply felt by mining machine giants even earlier.

Previously, Canaan Creative and Ebang International have both attempted to enter the capital market.

In August 2015, Ebang International was listed on the New Third Board, but due to various factors, such as poor liquidity and weak company quality, the New Third Board did not develop as expected and trading was sluggish. Before delisting in March this year, Ebang International raised funds twice, raising a total of 156 million yuan, and the final closing price remained at 17.14 yuan, with a total market value of only 1.8 billion yuan, which was only 4.76 times its net profit of 378 million yuan in 2017.

Canaan's road to listing was even more bumpy. In June 2016, Luyitong announced that it would acquire 100% of Canaan's shares at a valuation of 3.06 billion. However, the Shenzhen Stock Exchange believed that the acquisition was more like a backdoor listing, and after sending letters of inquiry several times, Canaan gave up. Subsequently, Canaan submitted an application for listing on the New Third Board in August last year, but due to the particularity of the company's business, it was subject to three rounds of feedback and inquiries from the stock transfer company and securities firms. In the end, Canaan once again took the initiative to give up the listing.

Now we see that the sluggish digital currency market is one aspect of the mining machine giants' pursuit of listing, but the other aspect is more alarming.

That is the uncertainty of the future market of Hong Kong stocks. The bear market is coming, and everyone can't escape it. They can only hope to catch the last train.

The A-share market has emerged from a bear market this year, and many small and medium-sized stocks have even hit historical lows. There is no worst, only worse.

Morgan Stanley believes that rising interest rates, RMB depreciation and worsening international situation will jointly threaten Asia's economic growth and corporate profits .

If Hong Kong stocks continue to fall or turn from bull to bear, it will have a significant impact on the valuations of technology companies, and the window period for listing will be short.

Therefore, we have seen that Xiaomi and Meituan have already taken action recently, and Didi and Ant Financial have also successively announced their plans to go public in Hong Kong. Mining machine giants must of course avoid any more trouble.

Therefore, we can draw two conclusions from the recent trend of the three major mining machine giants seeking IPOs. The first is that the uncertainty risks in the digital currency market are increasing. The second is that Asia’s economic growth is facing risks. Both A-shares and Hong Kong stocks face the risk of a bear market .

For ordinary investors, it is best not to enter the market easily at this time. You cannot easily intervene when the market is falling, thinking that you have caught the floor price. There may be a basement under the floor, and there is hell under the basement.

See the direction clearly, protect yourself, and embrace the search for true scarcity in this era.