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The secret behind Jihan Wu's marriage to 500.COM

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500.COM is trying to transform and enter the encryption mining industry; Wu Jihan wants to further consolidate his position and integrate the industrial chain of mining machines, mine farms, and mining pools.

Original title: "The Secret Behind Wu Jihan's Marriage to 500.COM"

Original Source: Planet Daily-Qin Xiaofeng

On January 26, Bitmain’s infighting lasted for two years, with Zhan and Wu The reconciliation between the two came to an end. After only 20 days of silence, Wu Jihan became active again and successfully dominated the headlines of the crypto market.

On February 16, 500.COM (NYSE: WBAI), a listed company in the US stock market, announced that it has partnered with BitDeer's subsidiary Blockchain Alliance reached a share swap agreement to wholly acquire BTC.COM mining pool Business (including mining pool, domain name and wallet).

According to Bitmain’s previous settlement plan, Bitdeer and BTC.COM belonged to Wu Ji after the split of Bitmain Cold side.

As one of the few "water sellers" in the encryption market, mining It is also one of the few sustainable profitable business formats other than exchange. Especially now that the price of BTC is soaring, the income of the mining pool is even more expensive.

Why did Wu Jihan choose to sell BTC.COM at this time? Is it for cashing out, or backdoor listing? Is BTC.COM Overvalued at $120 Million? Where did the acquirer 500.COM come from?

BTC.COM mining pool is worth 180 million US dollars?

In this acquisition, the most interesting thing is the acquisition transaction amount and the VAM contract.

Actually, this acquisition is not a cash transaction, but a private placement of shares.

According to the official announcement, 500.COM will issue 44,353,435 Class A common shares with a par value of US$0.00005 each, accounting for approximately 2021 10% of the shares outstanding on January 31 in exchange for the entire issued share capital of Blockchain Alliance Technologies Limited held by Blockchain Alliance following the completion of the reorganization. The transaction to be carried out under the share replacement agreement includes all the mining pool business of Bitdeer Technologies Holding Company (“Bitdeer” Chinese name: Bit Xiaolu) under BTC.COM, BTC.COM domain name and BTC.COM encryptionCurrency Wallet (collectively referred to as "BTC.COM Mining Pool Business") to the Company. The first closing transaction is expected to close by April 15, 2021.

It should be noted that 500.COM's common stock and "each American Depositary Share" (ie ADS) are not It is not a 1:1 exchange, but 1 ADS=10*common stock. According to the stock price on February 16, 1 ADS=27 US dollars, the value of the shares in this private placement is about 120 million US dollars.

In addition, the two parties also signed a gambling agreement:

If the BTC.COM mining pool business is in If net operating profit can be achieved in fiscal year 2021, 500.COM will issue additional Class A ordinary shares to Blockchain Alliance at par value per share; when the net operating profit exceeds US$20 million, 500.COM can issue up to 22,176,718 shares Class A common stock (approximately $60 million at current share price), representing approximately 5% of the company's outstanding shares as of January 31, 2021.
If the BTC.COM mining pool business has a net operating loss, 500.COM has the right to press Repurchase part of Class A ordinary shares held by Blockchain Alliance at face value per share; when the net operating loss is greater than US$10 million, 500.COM can repurchase up to 4,435,344 Class A ordinary shares, accounting for approximately 1% of outstanding shares.

According to this plan, BTC.COM is actually worth $180 million (1.2 100 million acquisition + 60 million VAM) for sale.

The question is, is BTC.COM really worth $180 million? The answer is: value.

Today, the unit price of BTC has soared to more than 50,000 US dollars, an increase of more than 7 times, and the income of the BTC.COM mining pool has naturally increased several times.

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Moreover, as the leading organization in the industry, the BTC.com mining pool has been ranked first for a long time, and now it often ranks in the top three. It is already a mature operation There is no big problem with sustainable profitability of projects. Therefore, it is more reasonable for BTC.COM to be valued at hundreds of millions of dollars, and the consideration of 120 million dollars is also a kind of pricing and recognition of BTC.COM by the capital market.

（data from BTC.COM）

Of course, the profitability of BTC.COM is only one of the reasons for consideration, and 500.COM pays more attention to the influence of Wu Jihan, the shareholder behind it.

“500.COM pays more attention to the industry influence of Mr. Wu Jihan. , mining pool for more than 10 years." A person close to 500.COM told Odaily Planet Daily, "Since 2017, the 500.COM team has had many business cooperations with Bitmain. The opportunity for this acquisition is that 500.COM .COM purchased a total of 15,900 mining machines in January and February this year, and the puzzle of mining pools is still missing on the mining industry map, so a strong alliance was formed naturally.”

500.COM: Former Leader, Competing in Crypto Mining

Acquisition of BTC.COM Announced Finally, everyone asked the same question at the same time:Who is 500.COM? Whyacquired the company under the name of Wu Jihan?

500.COM was founded in 2001 and is the first company in China to provide online lottery services; It went public in the United States in 2013, with an annual sales of more than 7 billion yuan. It was once the leader of China's Internet lottery industry.

However, like the encrypted market, the Internet lottery has also encountered national rectification. In April 2015, eight ministries, including the Ministry of Finance, the Ministry of Civil Affairs, and the State Sports General Administration, jointly issued a document prohibiting the sale of Internet lottery tickets. Internet lottery companies ushered in a cold winter, and 500.COM’s business plummeted, which had a profound impact.

, still no improvement.

Tiger Securities data shows that in the past five years, 500.COM has continued to lose money, with a net loss of up to 651 million yuan. However, fortunately, the company's operating income has always been positive, and its operating profit loss has gradually decreased.

(picture from Tiger Securities)

After undergoing several coaching changes and transformations, 500.COM began to explore the encryption industry, which is also an important issue for many US stock companies in the past two years. choose.

span class="font">Investing in Bitcoin, of which Tesla has spent $1.5 billion.

Different from the choice of the above companies, 500.COM chose a more robust and safer Compliant way to enter the circle - to enter the mining industry. In the encryption market, mining is one of the few sustainable profitable industries other than exchanges.

Odaily Planet Daily has counted the mining layout of 500.COM in the past two months: from purchasing mining machines to acquiring mines , mining pool, and complete the integration of the mining industry chain.

However, according to relevant sources, 500.COM did not enter the encryption industry only this year.

As early as 2016, 500.COM related investors began to get involved in the early investment in the cryptocurrency industry, including Fields, mining machines, public chain, and Dapp applications are all involved. However, due to compliance and risk preference issues in listed companies, the above-mentioned investments are mostly personal investment behaviors of shareholders or other fund entities.

Nowadays, 500.COM chooses to enter the market through its own brand, on the one hand because of the qualifications and compliance of the selected partners , EIA, and filing are relatively complete, suitable for inclusion in the main body of a US listed company; on the other hand, it is also an official voice to convey the move to the encryption market.

"In general, the 500 team is a veteran of the cryptocurrency industry. After years of industry precipitation, we decided to increase our positions Bitcoin mining industry, so as to realize the overall transformation. For the future cryptocurrency market, we have proved with our practical actions that we are optimistic about the long-term. In the case that a certain cryptocurrency has become a recognized settlement medium, there is no reason for us not to continue Increase positions. 500.COM is willing to do infrastructure construction for this distributed ledger settlement network.” A person familiar with the matter told Odaily Planet Daily.

However, the competition in the mining industry is also very fierce, and the monopoly of giants is serious. For 500.COM, how to gain a firm foothold and gradually expand its market share has become a thorny problem.

The acquisition of BTC.COM is just to fill the last short board and make the business structure of 500.COM more complete. Become a "closed-loop mining" business platform integrating mining machines, mine farms, mining pools, self-owned computing power, and managed computing power. At the same time, we can also use Wu Jihan’s influence in the mining circle to accelerate the development of 500.COM.

What are the benefits of Wu Jihan?

As the acquirer, 500.COM is to move to the encryption mining industry;As the acquired party, BTC.COM and Wu What's the benefit of avoiding cold?

Many people interpreted the sale of BTC.COM as a signal for Wu Jihan to cash out, but this is not the case.

On the one hand, when Wu Jihan reconciled with Zhan Ketuan, he got 600 million U.S. dollars in cash. Besides, regardless of bulls or bears, the mining pool can bring continuous disposable income, just like a golden rooster that keeps laying eggs. In addition, the current market is just right, and Wu Jihan's motivation to cash out is not strong.

On the other hand, the shares acquired in this acquisition cannot be cashed out quickly. According to the agreement, Blockchain Alliance has agreed to lock up the Class A ordinary shares acquired in this transaction as agreed.

Tokenize computing power and issue computing power coins; enter the traditional capital market, and do not rule out the possibility of backdoor listing in the future.

(1) Supplement BTC.COM computing power and return to the first place

With Binance and other exchanges have entered the mining industry, and BTC.COM and other former mining pool giants are having a hard time. The computing power continues to decline, and the income is naturally affected.

Currently, the BTC.COM mining pool accounts for 9.76% of the total BTC network computing power, ranking fourth advantage.

500.COM owns a large amount of computing power through the acquisition of Lotto Interactive Entertainment. As of September 2020, the computing power carried by the three data centers of Lotto Interactive Entertainment accounted for 6.27% of the computing power of the entire BTC network at that time, and this does not include the 15,900 mining machines purchased in January and February this year.

Looking at the major mining pools in the entire network According to the power share distribution, 6% of the total network computing power is also indispensable for BTC.COM. In particular, there is not much difference between the first few mining pools. Once the computing power of 500.COM enters the BTC.COM mining pool, it will help BTC.COM successfully overtake the current No. 1 F2pool and return to the No. 1 position.

This is exactly what Wu Jihan values. After quitting Bitmain, Wu Jihan did not lose interest in the mining industry, but was planning a new layout. The acquisition of BTC.COM was born under such a background.

According to informed sources, after the completion of the acquisition, 500.COM and BTC.COM (Wu Jihan) will rely on the existing Computing power, carry out computing power Tokenization, and issue computing power coins.

From the perspective of miners, Hashpower Coin can be used for risk hedging and gain benefits in advance. For investors, BHP provides a new mining model. Investors who can only trade in the secondary market can hold the Bitcoin computing power in the primary market through computing power coins, and receive Bitcoin rewards like miners.

A new channel for customer expansion has been established, bringing incremental growth.

Binance also launched BTCST, a computing currency.

Now, it is expected that 500.COM &

(2) Entering the capital market, backdoor listing

It is well known in the industry that Wu Jihan has always had a dream of going public, switching from Hong Kong stocks to U.S. stocks, even though he lost successively, he still did not give up.

Now, Canaan, which ranks second in the market, and Canaan, which ranks third Ebang International went public one after another, leaving only the number one Bitmain. But Wu has lost control of Bitmain, and only BitDeer can be fully controlled in his hands.

This acquisition is likely to be a signal for Wu Jihan to enter the traditional capital market.

If all the results are successfully completed, Blockchain Alliance (Wu Jihan) will hold a total of 13.04% of the shares of 500.COM become its second largest shareholder.

"It is not ruled out that in the near future, more encrypted currency assets will be loaded into 500.COM's listed companies in the United States. Whether it is Wu Jihan's related industries, we have to wait and see." The insider said.

Finally, it is worth noting that Sequoia China is not only one of the shareholders of 500.COM, but also a shareholder of Bit Deer. Behind the cooperation between the two, capital is also active.

Summary

TotalSpeaking of it, 500.COM's acquisition of BTC.COM is a product of the mutual needs of both parties.

500.COM is trying to transform and enter the encryption mining industry; while Wu Jihan wants to further consolidate his position by integrating mining machines, The industrial chain of mining farms and mining pools, while entering the traditional financial market, is even expected to package and list businesses such as mining pools in the future.

The competition in the industry is fierce, and it is in the stage of reshuffle. Will give time to test.