China’s Ebang Crypto Mining Firm Files Second IPO Draft Despite Significant Decrease in Profits
HKEX has so far demonstrated an unwillingness to list crypto-related firms on its exchange. Meanwhile, Ebang recorded weak revenue and profit in Q3 2018. Despite these problems and the lack of action on its first IPO application, however, Ebang is reportedly moving forward with its second IPO filing request.
The revised filing shows a significant decrease in revenue and gross profit in Q3 2018, according to the HKEX filing database. The new draft application was submitted on December 20 and discloses financial information for Ebang up to June 30 of this year.
The financial data shows that Ebang recorded $304 million (2.1 billion Yuan) in revenue over the first six months of 2018, eight times the revenue recorded over the same period in 2017. Profits for the first half of the year are also significantly higher, with recorded profits of $135 million – 16 times higher than the same period in 2017.
Despite the rosy picture of Q1 and Q2 2018, things may have taken a turn for Ebang in Q3 2018. The “Material Averse Change” section of the IPO re-filing indicates that the average monthly sales orders for Ebang bitcoin mining machines had decreased substantially:
“We experienced significant decreases in revenue and gross profit for the first three months ended September 30, 2018 compared to the preceding three months ended June 30, 2018.”
The firm, however, has not disclosed specific revenue and profit figures for Q3 2018. That means Ebang has not reported financial information from when the crypto markets really started to tank. This lack of information may worry the HKEX and weaken the chances of an Ebang IPO on the exchange.
Clearly, Ebang’s financial picture suffered in Q3 2018 – although it’s unclear by how much it suffered.
HKEX, meanwhile, has shown an unwillingness to list IPOs for crypto companies like Ebang and Bitmain, two of the world’s largest Chinese crypto mining hardware companies. Both companies are seeking an IPO on the Hong Kong Exchange in the near future.
Ebang and Bitmain May Have to Disclose Q3 2018 Revenue by January 2019
HKEX filing requirements do not state that Ebang has to disclose financial information from the preceding quarter. The current listing requirements show that the financial period reported by any new applicant “must not have ended more than six months from the date of the listing document.”
In more straightforward terms, Ebang needed to disclose financial documents up to June 30, but they did not have to disclose Q3 financial information.
Nevertheless, Ebang isn’t totally off the hook. According to CoinDesk, which cited a source familiar with the situation, both Ebang and Bitmain will have to disclose their Q3 financials to the HKEX at the beginning of 2019 if they want the IPO process to move forward. If Ebang and Bitmain want to receive a listing hearing from the HKEX, for example, then they will likely need to disclose Q3 financials.
The first Ebang IPO application was submitted to the HKEX on June 24. In that application, Ebang reported financial data ending on December 31, 2017. That application became inactive nearly six months after the initial filing date.
In October, it was reported that Ebang had halted the IPO due to alleged illicit finance practices, including unusual transfers of funds to and from Ebang and a Chinese investment platform.
Ultimately, despite the adversity, the teams running Ebang and Bitmain both appear to wish to proceed with an IPO on the Hong Kong Exchange. We’ll have to wait and see, however, what their financial pictures look like for Q3 and Q4 2018 – and the financial reports from the last half of 2018 could be ugly for both Chinese crypto mining hardware giants.