The third largest mining company, Ebang International, will go public in Hong Kong. Last year, it made a profit of 385 million yuan due to 95% of its blockchain business.

This year can be regarded as the first year for Bitcoin miners to go public.

Yesterday (June 24), Bitcoin mining hardware manufacturer Ebang International submitted a prospectus for listing in Hong Kong. This is the second mining company after Canaan Creative submitted an application for listing on the Hong Kong Stock Exchange in May.

Ebang International was originally a telecommunications service provider. In 2015, it transformed into a blockchain company specializing in the design, production and sales of blockchain processors (BPU). It is also the manufacturer of the mining machine "Ebit". The prospectus quoted iResearch data report that Ebang International's sales market share in 2017 was 11.0%, and its market share in terms of computing power sold was 10.9%, second only to Bitmain's 51% and Canaan Creative's 19.5%, making it the world's third largest Bitcoin mining machine manufacturer.

In addition, the prospectus shows that Haitong International Capital is the sole sponsor. In terms of financial data, the company's revenue from 2015 to 2017 increased from 92.1 million to 120 million yuan and then to nearly 979 million yuan at the end of 2017.

The blockchain business accounted for 31.7%, 42.8% and 94.6% of its total revenue in 2015-2017, with gross profit margins of 54.9%, 47.8% and 53.9% respectively.

In the last three years, Ebang International's annual profits were RMB 24.2 million, RMB 11.1 million and RMB 385 million respectively. The decrease in profit in 2016 was mainly due to the increase in R&D expenditure, the hiring of more R&D personnel and increased investment in the development of new blockchain products.

The total equity was RMB161 million, RMB212 million and RMB688 million respectively. The increase in 2016 was mainly due to the increase in non-current assets caused by the acquisition of Hangzhou Dewang. The further increase in 2017 was mainly due to the increase in net current assets due to the substantial growth of blockchain business.

At present, the amount of funds raised has not been disclosed in the prospectus, but in terms of the use of funds, the company stated that it will invest in the research and development and upgrading of new BPUs, non-cryptocurrency blockchain applications and telecommunications product research and development, production facility construction, brand marketing and overseas business expansion in the future.

Previously, there were media reports that Ebang Technology was seeking opportunities to enter the Hong Kong stock market with a financing scale of US$1 billion.

The mining machine market dividend brought by the surge in Bitcoin prices in 2017, as well as the policy dividends given by the state to independently develop chips, have accelerated the pace of mining companies entering the capital market. In May 2018, Canaan Creative submitted an IPO to the Hong Kong Stock Exchange, hoping to become the first blockchain stock; Bitmain's Wu Jihan said in a media interview that he was planning an IPO for Bitmain. In June this year, sources said that Sequoia Capital planned to lead the pre-sale round of Bitmain's IPO, with an amount of about US$400 million.

However, as the risk warning in Yibang International's prospectus indicates, cryptocurrency prices, network transaction fees, difficulty of mining activities, electricity costs, changes in chip parts suppliers and relevant regulatory environments at home and abroad may all affect its profit levels and sales.

The reality is that the industry is indeed facing the dilemma of a profit impact. According to Bernstein analysts, the average daily revenue of mining is only about 37% of the peak of US$17 million in 2017.

A few days ago, Rosenblatt, a Wall Street brokerage, reported that Bitmain and Canaan Creative may cut orders from TSMC and Samsung Electronics due to the weakening demand for mining machines. Similarly, there are signs that Nvidia may be facing an overstock problem due to underestimating the impact of the decline in mining demand and overestimating the demand for games.

To deal with such situations, Bitmain and Canaan Creative are transforming into AI to enhance market confidence, but the word AI has not yet been found in Ebang Technology's prospectus.

The recent decline in the Bitcoin market has sent out a negative signal. Amidst all the negative news, if the miners are successfully listed, will the subscription process after listing be smooth?