Situated in an already volatile cryptocurrency sector, Ebang International Holdings Inc (EBON) stock prices experienced compounded volatility following the release of the Hindenburg report. EBON stock prices experienced a dip of just over 6% at market close, settling in at USD$4.77. Pre-market fluctuation is seeing an upswing in the territory of 0.84%.
Hindenburg Shorts EBON stock
The Hindenburg Report was published by the short-selling Hindenburg Research company. Following this report, Hindenburg adopted a significant short position on EBON stocks. Shortly after, EBON stock prices crashing by a significant 12%.
Mismanagement of Shareholder Investments
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The crux of the report alleges malfeasance in regard to the allocation of capital the Chinese company raised from US investors. The Hindenburg report accuses EBON of redirecting the raised capital to benefit insiders and their relatives instead of using the funds for their expressed purpose.
Where Did the Money Go?
Having first been listed on Nasdaq in June of 2020, EBON conducted a round of fundraising in November of 2020. It went on to conduct two additional rounds in February of 2021, raising USD$170 million. Hindenburg alleges that these significant capital proceeds ended up being moved out of the company in a string of questionable deals that lack transparency. USD$103 million were used in bond purchases linked to a Hong-Kong based underwriter, AMTD International, while USD$21 million were used for the repayment of loans to EBON Chairman and CEO’s relative.
A Leading Crypto Mining Producer?
Hindenburg further claims that despite EBON’s self-proclamation of being a leading bitcoin mining machine producer, there is little evidence to support this grandiose statement. In fact, they argue that the release of EBON’s final miner was in May 2019, with a very disappointing 6000 miners being sold in the entire first half of 2020.
Concerns Over Ebonex
While Mr. Hu, EBON Chairman and CEO, has announced the official launch of their cryptocurrency exchange as a result of significant investments into the required research and development, Hindenburg has voiced reservations. In their report, Hindenburg suggests the numbers reported for Ebonex, EBON’s cryptocurrency exchange, were grossly inflated to the point of being fictitious. They also point to the sheer lack of online presence to discount claims of Ebonex’s popularity.
EBON’s Rebuttal to the Allegations
EBON has released a statement to the public and to its shareholders that it plans to debunk the accusations contained in the Hindenburg report, suggesting the report is rife with errors, unsupported speculation and inaccurate interpretations of events. If the Hindenburg report turns out to be inaccurate or unduly exaggerated, EBON share prices could see some promising returns based on the development of revenue generating products and services.