Ebang share prices on the Nasdaq have fallen 9% since Tuesday, when short vendor Hindenburg Research launched a report accusing the corporate of various misdeeds together with inflating its mining rig gross sales and cryptocurrency buying and selling volumes.
Why it issues: Ebang is considered one of two Chinese cryptocurrency mining rig makers that’s publicly traded on US inventory markets together with peer, Canaan Creative.
The timeline: On Tuesday, the day the short report was launched, Ebang shares opened at $5.23, falling 17% from market shut on Monday.
- On Monday, Ebang introduced the launch of a crypto change, dubbed Ebonex.
- The inventory misplaced a further 4.6% in the half hour after market open on Tuesday, then rose modestly to shut at $5.53.
- The inventory rebounded to $5.58 on Wednesday afternoon, however has been dropping since.
- Ebang inventory has misplaced 20% of its worth since market shut on Monday, closing at $5.03 on Thursday.
Missing earnings: Ebang’s inventory started to fall on March 17 after reaching a excessive of $11.85 per share that day. As of Friday, it has not but introduced a date for the discharge of its 2020 earnings.
- Ebang has solely disclosed earnings as soon as since itemizing on the Nasdaq in June, when it launched its half-year 2020 results on Sept. 25.
- The firm raised $150.4 million in two follow-on share choices, which closed on Feb. 17 and April 6.
The short report: Hindenburg analysis said Ebang is “merely the newest chapter in the ‘China Hustle’ disguised as a Bitcoin mining play,” referring to a documentary exposing Chinese corporations that conduct inventory market fraud on US exchanges.
- The firm didn’t record twice on the Hong Kong Stock Exchange in 2018, earlier than itemizing on the Nasdaq in 2020.
- Ebang’s tools is inferior to its opponents’, its gross sales have dwindled, and the corporate has tried to shift investor consideration to its new crypto change, which stories “fictitious volumes,” Hindenburg stated.
- The rig maker has inflated gross sales by third-party transactions and funneled money to “opaque offers with insiders and questionable counterparties,” the short vendor stated.
- In a statement on Wednesday, Ebang stopped short of denying the allegations, saying the report “incorporates many errors, unsupported speculations and inaccurate interpretations of occasions,” and that it’ll assessment the accusations and take “no matter motion needed” to guard traders.
Rig gross sales: Bitcoin and Ethereum prices have soared in the previous few months, and so have mining rig gross sales. Industry chief Bitmain’s deliveries are booked for months.
- Several corporations have pivoted to crypto mining, however none have introduced purchases from Ebang. The firm’s rigs aren’t widespread, in keeping with a number of miners TechNode has spoken with.
- The hottest mining rigs globally are Bitmain’s AntMiner, MicroBT’s Whatsminer, and Canaan’s Avalon Miners, in keeping with Flex Yang, CEO of Babel Finance, which offers monetary companies to crypto miners.
- Embattled Canaan Creative, which has misplaced its aggressive edge and was equally the goal of a short report, has seen its pre-sales rise since mid-February on the again of surging cryptocurrency prices.
- Ebang stated on March 17 that it had accomplished the design of its first 6-nanometer chip, whereas Bitmain has been selling rigs with 5nm chips since September.
- Hindenburg stated that Ebang’s gross sales are actually “near-zero,” and that earlier reported deliveries had been largely fabricated and or had been made up of faulty models, citing Chinese media stories.
The crypto change: Ebang first announced that it’s constructing a crypto change in August, getting into an already crowded market.
- The change was 5 days late to launch. Ebang shares prices rose on information associated to the crypto change.
- Ebonex reported $243 million traded between Ethereum and Bitcoin throughout its first 24 hours, Hindenburg stated, in contrast with $60 million on Huobi Global—the world’s second-largest change by quantity traded—on the identical day.
- The short vendor stated that it could have been unattainable for Ebonex to commerce this quantity “given its restricted internet and social media footprint,” citing comparatively low numbers of social media followers and Google searches.
- The 24-hour buying and selling quantity on Ebonex for ETH/BTC has fallen to $1.1 million as of the time of writing.
- The firm has additionally introduced plans for digital asset administration corporations in Canada, New Zealand, and Australia, in addition to plans to enter the mining enterprise.
Sales inflation scheme: The cause for the failed listings, Hindenburg stated, was a gross sales inflation scheme involving Yindou, a peer-to-peer lending scheme. P2P lending in China was an business rife with fraud, with many corporations merely Ponzi schemes masquerading as tech corporations.
- Cui Hongwei, the partner of the Yindou CFO, transferred RMB 250 million ($38 million) to Ebang between December 2017 and February 2018. Ebang then transferred RMB 380 million to Cui between March and April 2018, the report stated, citing native media.
- Hindenburg stated that this was basically a gross sales inflation scheme. Yindou defaulted on RMB 4.4 billion of debt in July 2018.
Shady underwriter: Ebang’s IPO underwriter, Hong Kong-based AMDT Global Markets Limited, has a “historical past of fraud and self-dealing allegations (together with from considered one of China’s largest non-public fairness corporations), in addition to a observe file of US IPO flops,” Hindenburg stated.
- Ebang directed $103 million in bond purchases linked to AMDT following its profitable IPO on Nasdaq, in keeping with the report, an quantity $11 million greater than its IPO proceeds.
