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Second Time Won’t Be The Charm for Ebang’s Listing Aspirations

3 mins
Updated by Kyle Baird
Ebang Communications, one of the largest manufacturers of cryptocurrency mining equipment, got a send-out from the Hong Kong Stock Exchange (HKEX) with its listing application — but it has no intention of giving up.
The company updated its financial reporting, removed the issues revealed by the regulator, and filed another application — but it has slim chances of making its way into the high society of Chinese public companies. The Securities and Futures Commission of Hong Kong (SFC) usually reviews the documents submitted by the applicants to make sure that they comply with the existing regulatory requirements. Once the SFC gives the green light, the company can move to the next stage and hold roadshows. The company meets with potential investors and defines the basic parameters of the prospective IPO, including the issuing volume, and a starting share price. However, the SFC found a lot of issues and discrepancies in the financial data provided by Ebang. Moreover, the regulator accused the company of forged reporting, failure to provide critical financial data for Q3 2018 and sham contracts with an investment portal In 2017, Ebang made numerous payments to Yindou’s accounts to the total amount of $74.6 million and received $20.8 million back in cash. These manipulations were supposed to boost revenues and, potentially, impress prospective investors. According to the initially submitted data, Ebang Communications earned $55.3 million in 2017. However, following the regulator’s accusations, the company was forced to slash the figure to $11 million. Ebang While Ebang reported solid revenue growth of $135 million in the first half of 2018, the real financial situation of the company raises doubts. The reporting submitted to the regulator does not cover the third quarter, when the market situation worsened significantly due to collapsing cryptocurrency prices and vanishing demand for mining equipment. In accordance with the existing HKEX listing rules, new applicants shall provide the financial data for the period that ended less than six months from the date of application. At this stage, Ebang disclosed the bare minimum, but it the HKEX together with the SFC will do their best to drag the process until the beginning of 2019 and force the company to disclose its Q3 figures. Moreover, in the new filing, Ebang confessed that average monthly sales orders for bitcoin mining devices decreased significantly in Q3 compared to Q2 2018. Bad financials and the company’s resistance to disclosing data will probably serve as the main reasons to freeze Ebang’s listing application for the second time. However, deteriorating profits and declining demand for mining equipment are not the only issues that concern the regulator and the exchange. The volatile nature of cryptocurrency markets affects Ebang business and creates a risky environment both for the company and its investors, which makes HKEX wary especially in the absence of comprehensible regulation in the industry. The Hong Kong exchange has already blocked Canaad Creative’s application. Bitmain is about to face the same fate. It remains to be seen whether Ebang manages to sidestep its rivals and become the first listed manufacturer of cryptocurrency mining equipment. However, considering continued manipulations with the financial data and skeptical attitude of the regulator, the chances are swiftly decaying to zero. Do you believe that Ebang will get listed on HKEX? Would you like to invest in its shares? Let us know what you think in the comments below. 


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