Yibang International has submitted an IPO application for the second time, and the prospects for mining machinery companies to go public are uncertain
The ups and downs of the virtual currency market have also profoundly affected the listing process of mining machine manufacturers. Recently, Yibang International, one of the top three domestic mining equipment giants, once again submitted a listing application to the Hong Kong Stock Exchange. The application was last submitted in June 2018 and is currently not valid.
The waterfall in the virtual currency market in recent months has hit manufacturers that rely on selling mining machines for profit. In the industry's view, it is precisely because the price of virtual currency is unstable that the profit model of mining machine manufacturers is unstable. However, this may be the reason why the Hong Kong Stock Exchange has been slow to release the listing of such companies.
Negative public opinion may affect the pace of Yibang's listing
In February 2018, Yibang International announced that it plans to go public in Hong Kong. As a company listed on the New Third Board, Yibang International was delisted from the New Third Board on March 23 and officially submitted an IPO prospectus on the Hong Kong Stock Exchange in June. According to the updated prospectus, Yibang International's revenue for the first half of 2018 reached 2,138 billion yuan, operating profit of 1,089 million yuan, and profit for the period was 931 million yuan, an increase of 43.93% over the same period in 2017.
Yibang International's revenue mainly comes from the BPU mining machine business. The sales volume of mining machines in the first half of 2018 was 309,000 units, an increase of nearly double compared to 158,800 units in the same period last year; revenue from BPU in the first half of 2018 was 2.115 billion yuan, accounting for 98.9%, compared to 202 million yuan in the same period last year, accounting for 85.1%.
Furthermore, the 542.9 million yuan transfer crisis between Yibang International and the online lending platform Yindou.com is still unresolved. According to reports, Cui Hongwei, the wife of Li Yonggang, the actual controller of Yindou Network, transferred a total of 524.9 million yuan to Yibang International between December 2017 and February 2018. From March to April 2018, Yibang International transferred a total of 380 million yuan to Cui Hongwei. The whereabouts of the remaining 144.9 million yuan is still unknown. Investors from Yindou Network believe that the amount did not comply with the contract agreement, that it was money defrauded by Yibang Network from investors, and demanded that Yibang International pay it. Up to now, Yibang International has made no statement on this matter.
It is worth mentioning that Yibang International's updated prospectus did not disclose the company's third-quarter operating information. Among the major adverse changes, it was mentioned that BPU customers determined that the value of the new purchase order contract in the third quarter increased slightly compared to the second quarter, but the average monthly new contract value recorded since the third quarter of 2018 dropped sharply, and compared with the first three months ending June 30, 2018, revenue and gross profit fell sharply in the first three months ending September 30, 2018.
According to some opinions, the performance of all major mining machinery manufacturers showed a sharp decline in the third quarter. Yibang International submitted another application just before the third quarter report was released in order to reduce barriers to listing. Regarding the timing of Yibang International's re-application for listing, Bo Chunmin, assistant research manager of the Yiou think tank, said in an interview with Times Finance that there is not much special significance; it is just that the application period has expired and it is just re-submitted. However, the big difference between Yibang International and other mining machinery companies is that Yibang International was delisted from the New Third Board and then submitted an IPO for Hong Kong stocks. Furthermore, after submitting the prospectus, Yibang International faced the “Yindou.com Illegal Fund-raising Case” and “Problem Mining Machine Complaints”, and the listing had a huge impact on its brand.
The future of the three major mining machinery companies to go public is uncertain
In the context of the cold winter of virtual digital currencies, Yibang International is not alone in having a bad day. The mining machine sales industry has almost come to a standstill due to the continuous decline in the market of various virtual digital currencies, making it difficult for mining revenue to cover costs. The sales price of various Bitmain mining machines has generally dropped by more than 90%. Take the Bitcoin mining machine T9+10.5T as an example. This model went live on January 3 this year and was priced at 24,900 yuan at the time of launch. Currently, the price of this model has dropped to 1,800 yuan, a decrease of 92.8%.
Financing blood transfusions and getting through the winter smoothly is the direct reason why mining machine manufacturers are choosing to go public. “From a macro perspective, the general environment is in a cold capital winter, so many Internet companies such as Meituan Review and Xiaomi chose to go public this year; from a micro perspective, Bitcoin prices continued to fall, and mining machine sales were greatly affected as the main revenue, which had a negative impact on the company's operating income. Choosing to go public when the company's revenue is the best is undoubtedly the best choice and the most suitable time point; the second is strategic adjustment. All three companies are beginning to focus on AI chips. AI chip development requires a lot of financial support, especially when the external market enters winter. Support is provided.” Bo Chunmin said.
Despite the urgent need for listing, the listing process is still uncertain for the three major mining machinery companies. Apart from Yibang International's second listing application, mining machine manufacturer Jianan Yunzhi's IPO, which went to Hong Kong in May of this year to submit a prospectus, has expired, and up to now, it has not submitted a new application. However, Bitmain, a giant in the mining machinery industry, has made no progress since submitting a listing application to the Hong Kong Stock Exchange at the end of September this year. The news from the regulatory side is not encouraging either. Recently, some media quoted sources as saying that Hong Kong stock market regulators and operators said they are unwilling to approve Bitmain's initial public offering (IPO) until an appropriate regulatory framework is in place. The regulatory side believes that the IPO of any cryptocurrency trading platform or related company is “immature” at this stage.
Yao Xiang, a senior blockchain researcher, told Times Finance that the “Hong Kong Securities Regulatory Commission” has introduced new regulations on virtual assets, believing that they have significant risks, so the review of related companies may be more careful. Some analysts pointed out that mining machine manufacturers' profits depended too much on the mining machine sales business, and in the current context of a sharp drop in virtual digital currency prices, the prospects for this profit model are uncertain, which has become a key factor in the reluctance of relevant departments to go public and release mining machinery companies.
In fact, the three major mining machine manufacturers have also realized that relying on sales of mining machines to maintain continuous growth in performance is not a long-term solution; business transformation has become their common choice. Yibang International stated in its prospectus that the company will mainly focus on three major projects: artificial intelligence data processing equipment, non-cryptocurrency blockchain application products and solutions, and communication technology; Jianan Yunzhi indicated that it will strengthen AI chip development and other sectors; Bitmain released second-generation cloud AI chips and terminal AI coprocessors in October this year, and launched various edge computing AI terminals.
Regarding the reason for the transformation of mining machinery enterprises, Yao Xiang believes that the “13th Five-Year Plan” indicates that it is necessary to increase the supply capacity of core basic hardware. Improve the design level of key chips and develop chips for new applications. It is not ruled out that the enterprise's carrying out this business is related to responding to national policies. However, basic hardware research and development is an area with high technical requirements and slow output. It may not bring significant performance growth in the short term and requires long-term observation.
“The three major mining machine manufacturers all face the risk of a single product structure, so diversification of products is a major trend.” Bo Chunmin said, “As for choosing to expand into businesses such as AI chips and telecommunications, I think the main thing is that the technology is compatible and the market prospects are good. The three major mining machine manufacturers are all producing AISC chips, which are technically compatible with AI chips. Furthermore, the AI chip market is huge. According to Gartner's forecast, the AI chip industry will reach 4.8 billion US dollars and reach 14.6 billion US dollars in 2020, which is a huge cake.”
“However, although transforming AI chips will reverse negative public opinion and external pressure brought about by the bear market to a certain extent in the short term, they will not occupy a large share of the overall market in the long run. Foreign companies include Qualcomm and Nvidia, and domestic ones include Huawei and Cambrian. In these competitions, mining machine manufacturers do not have an absolute advantage. Even if AI chips are developed, they will not bring much revenue in the short term, and the revenue from business expansion is difficult to make up for the decline in mining machine sales revenue.” Bo Chunmin added.
Source: Times Finance
