ASIC hardware manufacturer Ebang International recently launched its roadshow to prepare for an initial public offering (IPO) on the U.S. capital markets, which could see the Hangzhou, China-based company raise as much as $125 million and receive net proceeds of approximately $97.4 million.
Ebang previously planned to raise funds by listing shares on the Hong Kong Stock Exchange (HKEx) but later decided to let its application lapse following in the footsteps of larger rival Bitmain Technologies and Canaan. Like Canaan, which raised $90 million in its 2019 public listing, Ebang feels the U.S. market offers them the best chance for expansion.
The company intends to offer 19.3 million Class A ordinary shares at a price range of $4.50 to $6.50. At the midpoint of the proposed range, Ebang International Holdings Inc. would hold a market value of $721 million. It plans to list under the symbol EBON.
The listing comes during a time when the hardware manufacturer is struggling to remain profitable. In its financial disclosure filed with the U.S. Securities and Exchange Commission (SEC), Ebang unaudited estimates show it incurred a net loss of $2.5 million on earning of $6.4 million for Q1 2020. The company says the decline is because of a decrease in non-recurring local government’s tax rebates.
Ebang’s share listing comes during a time when U.S. investor sentiment around Chinese companies is declining because of recent accounting scandals. Government officials in both countries continue to ratchet up protectionist rhetoric. U.S. regulators are tightening listing rules for foreign companies while officials in the People’s Republic of China continue to issue new laws, rules, or regulations governing the digital currency industry.
Adding to the cloudy futures of ASIC hardware producers are digital currency market stagnation, low mass adoption not to mention a reset and contraction taking place inside the block reward mining sector; a risk Ebang alludes to in its prospectus. It further mentions the deteriorating trade relationship between the U.S. and China and supply chain disruptions stemming from COVID-19 as situations that could have a material adverse impact on its business.
For new investors, picking winners out of the leading Bitcoin mining hardware producers can feel like playing the lottery. The BTC block reward mining ecosystem is littered with zombie corporations that survive for much longer than the rules of capitalism usually permitted. The corporations make up a significant portion of the client base for Ebang, Bitmain, and Canaan.
How Ebang will prepare its business for the tough time ahead should be factored into the vetting process before deciding to participate in its IPO. Along with what are investors buying really considering the customer base for new hardware is by most accounts dwindling.
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