Ebang Communications, A Chinese crypto mining hardware manufacturer filed its second draft for IPO at the Hong Kong Exchange (HKEX), after their first application failed to proceed.
The chances of this application certainly look bleak as well, for one HKEX has been quite unwilling to list crypto-related firms on its exchange. Secondly, Ebang recorded weak revenue and profit in Q3 2018. Reportedly, Ebang has still proceeded with its second IPO filing request, despite the lack of action on its first IPO application received.
Ebang’s Second Draft
Submitted on December 20, this new application discloses financial information for Ebang up to June 30 of this year; showing a significant decrease in revenue and gross profit in Q3 2018.
According to the HKEX filing database, over the first six months of 2018 Ebang recorded $304 million (2.1 billion Yuan) in revenue, eight times the revenue recorded over the same period in 2017. The first half the year also illustrated significantly higher profits, $135 million, 16 times higher than the same period in 2017.
However, Q3 took a turn in the negative side, the “Material Averse Change” section of the IPO re-filing indicates that Ebang experienced a substantial decrease in the average monthly sales orders for bitcoin mining machines
“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.”
While Ebang’s financial picture suffered in Q3 2018, it’s unclear by how much it suffered as the firm hasn’t disclosed the specific revenue and profit figures for the time frame. Choosing not to report financial information from when the crypto markets really started to sink, might not be a positive sign. This might be a major concern for HKEX and subsequently, weaken the chances of an Ebang IPO on the exchange.
Meanwhile, HKEX has illustrated an unwillingness to list IPOs for crypto companies like Ebang and Bitmain, two of the world’s largest Chinese crypto mining hardware companies. Both the mining firms have been eyeing an IPO on the Hong Kong Exchange.
The filing requirement for HKEX does not necessitate Ebang to disclose financial information from the preceding quarter. It precisely states that the financial period reported by any new applicant “must not have ended more than six months from the date of the listing document.” So Ebang needs to just disclose financial documents up to June 30, and not the financial information for the Q3.
According to CoinDesk, who 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, in order to receive a listing hearing from the HKEX.
Ebang’s first IPO application was submitted to the HKEX on June 24, reporting financial data ending on December 31, 2017. However, nearly six months after the initial filing date, the application became inactive. Furthermore, it was reported in October, 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.
Notably, both Bitmain and Ebang are wishing for an IPO approval, despite the covert opposition. Since the financial reports from the last half of 2018 could be ugly for both Chinese crypto mining hardware giants, we’ll have to see if they get approvals for their IPO or not.