500.com, a former online lottery leader, plans to issue more bitcoin

On December 21, 500.com, a U.S. listed company, announced that it would issue 85572963 classA common shares to lucky Information Technology Co., Ltd. (hereinafter referred to as “lucky information”) with a total purchase price of about 23 million US dollars, and plans to use bitcoin to complete the transaction historically. At the same time, 500.com announced that, in view of the successful experience of the affiliated company Lotto mutual Entertainment Co., Ltd., the board of directors proposed to the company to explore the blockchain and cryptocurrency industry, and made management adjustments: the board appointed Mr. Yang Xianfeng as the chief executive officer of the company, and mentioned that Mr. Yang has accumulated rich experience in the crypto digital virtual currency industry and is currently in charge of Hong Kong Internet blockchain big data center business of Lotto mutual Entertainment Co., Ltd. All kinds of signs show that 500.com is going to usher in the play of the blockchain and cryptocurrency industry. When it comes to 500.com, people familiar with the industry are the first to associate “good boy”. As the first Chinese Internet lottery company listed on the New York Stock Exchange in the United States, 500.com was once a leading domestic Internet lottery company with an annual sales of more than 7 billion yuan. In 2015, after the state started the rectification of the lottery industry, it was the first Chinese Internet lottery company to list on the New York Stock Exchange, In order to cooperate with the regulation, 500.com has suspended the Internet lottery business actively. So far, 500.com has made losses for five consecutive fiscal years, with a cumulative loss of nearly 2 billion yuan. In this context, why did 500.com suddenly issue additional shares at this time? According to the announcement, 500.com is a private placement of Fortune company controlled by Luo Zhaoxing, founder of 500.com. According to the announcement, the company newly appointed Yang Xianfeng as CEO. It is worth noting that Yang Xianfeng was an old entrepreneurial employee of the company. He returned to 500.com in 2018 and served as senior consultant of blockchain data room project team of Lotto mutual entertainment company. Since January 2019, he has been the director of Sichuan Changhe hydropower consumer blockchain big data Industrial Park of Leto mutual entertainment It’s a long story. Lotto mutual entertainment is a Hong Kong listed company acquired by 500.com in 2017. It was a lottery concept stock of the Hong Kong Stock Exchange and one of the manufacturers of sports lottery terminals. In 2019, the company began to explore blockchain and digital currency business, and made considerable progress. And these are the projects that the new CEO is building. “Water and electricity consumption” new model, currency circle ushered in a new dark horse? In this announcement, 500.com clearly mentioned that the board of directors suggested that the company explore business opportunities in the blockchain and cryptocurrency industry based on some successful experience of its subsidiary Lotto mutual entertainment. So, what is the layout of the two-year sneak Lotto mutual entertainment? From the information that can be retrieved, up to now, the company has independently invested, constructed and operated three bitcoin data centers, which is the largest hydropower blockchain data center project with the most comprehensive qualifications and the highest construction standards in China. According to the internal statistics in September 2020 (the computing power of the hosting operation equipment in the site / the total computing power of the whole network), the computing power of the three data centers of the company has reached 6.27% of the total network computing power of bitcoin, which can be described as a shocking dark horse. For the mining business of digital currency, the cost of electricity accounts for more than half. Therefore, how to find low-cost power becomes the key. What’s more, Lotto has chosen a unique “water and electricity consumption” mode in this business. According to the information disclosed by the company, its core source of power is the redundant electricity generated by hydropower stations in the wet season. The power generated by natural physical forces (water energy, wind energy, etc.) is greatly affected by seasons, which will generate a large amount of electric energy redundancy in the abundant water period (from May to October every year). This part of redundant electricity can not be used or the transmission capacity is insufficient. According to statistics, in 2018 and 2019, some provinces in Southwest China abandoned 90 billion kwh of electricity. Therefore, Lotto mutual entertainment company chooses to establish data centers in these provinces, which not only conforms to the direction of national energy conservation policy, but also creates extremely significant economic and social benefits for the local areas, which can be described as a win-win situation. The innovation of this business model has also been verified in terms of revenue. In November, Lotto mutual entertainment released the third quarter performance report, which showed that the company turned loss into profit in the third quarter of this year, with revenue of HK $153 million, of which, the revenue generated by big data center services was about HK $152.6 million; in the first three quarters of this year, the revenue reached 283 million yuan, an increase of more than 10 times compared with the same period of last year, and the gross profit increased by 273.9% from HK $9.31 million in the same period of last year to HK $34.81 million. Another noteworthy information is that 500.com’s announcement disclosed that the total purchase price of the additional shares is about 23 million US dollars, which will be paid in US dollar cash or other encrypted digital currencies, including bitcoin, which will be finally determined by the company within one month. According to insiders, the currency value of bitcoin has been soaring recently, and various kinds of transactions are also very active. However, there should be no precedent in the world to use bitcoin to complete the share issuance of American listed companies. At present, it is not clear whether there are some corresponding regulations in the US securities market. According to the information disclosed by 500.com, the board of directors of the company is also more cautious. It will take one month to assess the risk and finally decide whether to use this trading method creatively. Since March this year, the digital currency represented by bitcoin has been soaring. Many funds and investment institutions have entered the market and started to hold bitcoin assets and have made a lot of profits. For example, MicroStrategy, a US listed company controlled by BlackRock, pioneer fund and Russell, has made profits in the past five years in the past five months The total net profit of the business. And the famous gray scale investment company is more frequent. According to the data, as of November 18, the number of bitcoin it held had reached 510000. The total value is more than 10 billion US dollars. If we estimate the purchase cost, the floating profit may be as high as 5 billion US dollars. “Buying and holding bitcoin, after all, is still a venture capital activity,” said a senior person in the currency circle. No matter what 500.com ultimately chooses, this approach is still refreshing and impressive. Of course, from the outside world, the most important thing is not only the investment ability, but also how to layout the industry in this industry, which is the most important core value of the company. Source: Beijing daily client reporter Xie Yongli editor: Xie Yongli process editor Tai Shaofeng

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