The largest mining company Bitmain has been the shock of corporate restructuring. On October 29 at the private will of the Board of Directors co-founder of Jihan Wu was dismissed from all posts of his business partner and co-founder of the company — Mikri Jean. Wu admitted that Bitmain was on the verge of bankruptcy, called Jean unreliable, and his ideas for the development of a startup — crazy. Now the entrepreneur is not allowed in the office, and employees forbidden to communicate with him. However, Jean says that he is ready to defend their rights in court and intends to return to the company as soon as possible. The abrupt dismissal of Jean happened just a week after Bitmain has applied for another attempt at an IPO in the United States. Why quarrel Wu and Jean, what are the chances of Jean to return to his post and is it true that Bitmain is on the verge of bankruptcy.
Mining company Bitmain was founded by Jihan Wu and Mikri Jean in 2013, in connection with which both became CEO of a startup. By 2018, the company has taken the position the world’s largest developer of applied integrated circuits (ASIC) for mining bitcoin, and its founders became the richest men in kryptomere. 2017 brought the company billions, but the last two years was not easy.
Jihan Wu and Mikri Jean. Source and Source.
In September 2018 Bitmain has applied for an IPO on the Hong Kong stock exchange, valuing the business at $3 billion and is hoping to raise as much as $14 to $18 billion. the Regulators of Hong Kong suggested that due to the lack of rules to regulate cryptoprotocol application is not approved. In November 2018 the company has a debt of $300 million before the chip maker TSMC. One of the reasons is the competition with nChain for control of bloccano Bitcoin Cash. Then Wu decided to rent power from bitcoin miners to Antpool, and pools BTC.com for the extraction of BCH. Bitmain pay for the hash rate to BTC, and received the award in BCH. It turned out to be unprofitable — the company was losing several million a day. In addition, due to the bear market of unsold stocks of miners reached a billion.
Because debt in December 2018, the company laid off about half of their 3,000 employees. Later, the mining giant closed its offices in Israel and the Netherlands and has suspended production in Texas, where he was from 7,000 to 8,000 miners. In March 2019 the deadline for the IPO has expired, after which the company decided to apply for the new York stock exchange.
In may Bitmain has reduced its computing power by almost 88% from 2072 PH/s to 237.29 PH/s per month (now this figure stands at 344.89 PH/s). According to the calculations CoinDesk, the company can suspend the work until 130 000 AntMiner devices S9. The proportion of Beijing, the company in General Hasrat network of bitcoin fell tenfold — from 4% to 0.4%.
The media wrote a lot about short-sighted management policies of both the CEO and their tandem, predicted a grim finale. In November of last year there were rumors about the simultaneous resignation of Wu and Jean from the positions of CEOs for quarterly losses of $500 million and growing conflict between co-founders. In January 2019 Wu and Jean left their posts SEO, but left their shares of stock, and therefore the right to make strategic decisions. CEO appointed Haichao Wang, Jean became Chairman of the Board of Directors and Executive Director. In July of this year, Wu founded his own trading cryptopleura Matrixport. It seemed that the conflict the founders for a time subsided, but broke out with new force in November this year.
The unexpected ouster of Jean
October 29, at an emergency meeting of the company Cihan Wu said that their conflict with Mikri Jean dritsas 2015 and explained why he considers necessary to discharge its longtime partner from the management of Bitmain. All employees were sent a letter stating that they are forbidden to follow the instructions of the Jean under penalty of dismissal. He Wu again took the position of CEO.
Wu confirmed that their conflict with Jean escalated in December 2018 during a round of major layoffs. He noted the failure of the company: spending on «unnecessary and hasty investments in research projects, employment of hundreds of people without preliminary analysis». Wu insisted on the dismissals, and Jean had originally been firmly opposed. Wu and three other members of the Council tried to convince Jean. But he has not changed his point of view and tried to rally other senior and middle management — the majority supported him.
According to Wu, in December 2018 Jean tried to become the sole CEO, threatening to cancel the stock options anyone who will not support him. It didn’t work out, but both CEOS have agreed to resign.
Note also that among the Chinese media has been rumors that there may be evidence of theft of property of the company Mikri Jean — that allegedly gave the company’s assets to their friends. November 1, Jihan Wu denied this information.
During the emergency meeting, Wu called for the submission of Jean about the development of the company crazy. Chief among them is the doubling of investment in research on artificial intelligence, involving up to 300 new employees.
Wu believes it distracts from Bitmain mining, complicates the preparation of financial statements for IPO and the company has taken on responsibilities salaries and training of new staff. Wu also believes that AI is a business venture Bitmain, and to have the opportunity to invest, we need more money mining on your primary business.
According to Wu, because of the mistakes of the leadership at the end of last year Bitmain was on the verge of bankruptcy. The company would lose suppliers and partners, the price of bitcoin dropped to the then minimum. From Bitmain began to accumulate debts, but was saved only a rise in price of bitcoin.
Wu said that 2019 was a year of missed opportunities. Indeed, the major competing manufacturers Bitmain, including Canaan, WhatsMiner and InnoSilicon was able to increase sales after the market’s growth this year, and Bitmain — no. Meanwhile BTC.com and Antpool, the flagship mining pools, Bitmain, ceded its longtime leadership position to competitors Poolin and F2Pool.
Interesting, but it is not entirely clear, as Jean could fire, given that he is the Chairman of the Board of Directors and main shareholder.
According to the IPO filing in Hong Kong until December 2018 Jean was 36% of the stock Bitmain, Woo — 20.25%. Other major shareholders are Huashan GE (4.18%), Japan Zhao (6.26%) and ISWA Hu (4.18%), external companies Sequoia Capital China (2.7%), Richway Investment Limited (1.17%) and Sinovation (1.13%), and trust to motivate employees with 18.47%.
The expulsion of Jean occurred on the background of the new Bitmain preparing to IPO. On 30 October it became known that the company has applied to the Commission on securities and exchange Commission (SEC) US. Financial support provided by Deutsche Bank, as a consultant hired by the former Chairman of the Nasdaq China Zheng Hua. It is not known how Bitmain wants to raise through IPO American. But, in June, according to Bloomberg, it’s about $300−$500 million. In the media there are rumors that the IPO was the cause of the escalation of the conflict between Wu and Jean is the second allegedly didn’t want to announce the low financial performance of the company.
Listing with the SEC is a feat — Bitmain subjected to the most severe test. Consideration of the application will take up to two months. It is noteworthy that on 28 October the main competitor of the company Canaan Creative has also filed an application for IPO in the US, assessing your business at $400 million.
In an open letter published on his WeChat account, Jean stated that he had been removed from the company without his consent during a business trip and the news was a surprise to him. Now he has returned to Beijing, but, according to media reports, he was not allowed even to the office.
«Still I do not understand how those scenes in the TV show, where are your partners that you trust, «brothers», with whom you fought, they hit you in the back, can really happen in real life,» laments Jean.
Jean assured employees and shareholders Bitmain that will take all legal means in order to return to the company. «We want to reach the goal and take 90% of the market of manufacturers of miners! Our AI business can achieve a qualitative breakthrough: to bring in revenues of 100 million yuan (~$14.25 million) in 2019, 1 billion yuan (~$143 million) in 2020,» added Jean, confirming the commitment to the chosen course.
The story of Bitmain shows the instability of the mining companies and their business models under the influence of the market volatility and internal differences. Investors understand that the company miraculously survived last winter, and there is no guarantee that the next time she is lucky again. It is unclear whether the mining business in General to earn money in the future.
In the case of Bitmain situation is exacerbated by the conflict founders, who fanned strategic disputes to an ugly power struggle. This fight distracts the user from the drudgery of development and scale of the company. I hope that Bitmain will solve its own problems, and the SEC will not consider corporate disputes when deciding on its admission to the stock exchange. Now remains to be seen what the outcome of the conflict between Wu and Jean.
If Bitmain does not change course, he can repeat a recent negative experience WeWork, which opened its records in preparation for the IPO, and its highly inflated valuation has fallen sharply. With questionable prospects, with a serious decline in profits and management problems with Bitmain, the situation looks much worse.
Bitmain will have to work very hard to meet all industry standards. However, the company has already started to move in this direction. In September it launched a new platform «world map digital mining» (WDMM) helping individual miners to find a profitable farm. In October, the company completed the construction of a large mining center in Texas, with a capacity of 50 MW, planning to further increase it to 300 MW, which would make it the largest in the world. Last month, Bitmain has announced a new model ASIC miners series S17 with increased efficiency. Since November, the company announced salary increases for 80% of the staff and management reforms that give them greater flexibility in decision-making.
Sharing control Wu is also likely to benefit from Bitmain. The entrepreneur understands that companies need to focus on your core business and not be sprayed in various directions. If Bitmain miracle will be released to the stock exchange, this will pave the way for the rest of cryptomeria.