Periscope｜The whole story of the Bitmain "coup": Wu Jihan has received strong support from shareholders and Zhan Ketuan has aroused public anger

The direct cause of this "coup" was the second annual organizational structure adjustment implemented internally by Zhan Ketuan, which directly caused a large number of old employees who had followed Bitmain in its entrepreneurship for many years to resign. There was great public outrage within the company, and some employees even commented that "Zhan Ketuan's head was squeezed by the door" and "Zhan Ketuan has gone crazy."

Wu Jihan (left) and Zhan Ketuan

Tencent News "Periscope" Author Liu Peng

On October 28, 2019, Bitmain Chairman and co-founder Zhan Ketuan released the latest version of its AI server at the Shenzhen Security Expo, ambitiously entering the field of video image intelligent analysis.

But more than 2,000 kilometers away in Beijing, Bitmain's headquarters, a storm against him was brewing. Bitmain co-founder Jihan Wu, who resigned as CEO and stepped down from management at the beginning of this year, changed the legal representative and executive director of Beijing Bitmain Technology Co., Ltd. from Zhan Ketuan to himself at the Industrial and Commercial Bureau, and Ge Yuesheng, who had followed Jihan Wu for many years, became the new supervisor.

The next day, an even bigger storm hit. Wu Jihan sent an email to all Bitmain employees, dismissing Zhan Ketuan from all positions and blocking his access to the company. The HR director brought in by Zhan Ketuan was also dismissed, and Wu Jihan appointed Suo Chao, who had also followed him for many years, to return as the chief human resources officer.

At noon on October 29, after sending the email to all employees, Wu Jihan convened an emergency meeting for all employees. During the one-hour meeting, Wu Jihan listed Zhan Ketuan's mismanagement, calmed the employees, and asked everyone to unite as one to save the company and not go further down the wrong path.

Tencent News "First Line" exclusively learned that the direct cause of this "coup" was the second annual organizational structure adjustment implemented by Zhan Ketuan internally, which directly caused a large number of old employees who had followed Bitmain for many years to resign, causing great public outrage, and some employees even commented that "Zhan's head was squeezed by the door" and "Zhan went crazy". In addition, Zhan Ketuan's extremely diligent and hands-on management style, while also having an absolute desire for control, caused panic among the internal staff, and they began to call for Wu Jihan to come back and take charge of the overall situation.

Earlier in the personnel shake-up in March this year, Wu Jihan resigned in disgrace and Zhan Ketuan stepped forward to serve as chairman. However, the official seal of Bitmain has always been kept by Wu Jihan's assistant. Therefore, on October 28, Wu Jihan was able to successfully change a series of industrial and commercial information including legal representative and supervisor at the Industrial and Commercial Bureau.

Although Wu Jihan launched a surprise attack without notifying any shareholders in advance, external shareholders began to waver and split. Internally, Wu Jihan also received widespread support from senior executives and employees, including CFO Liu Luyao, who joined Bitmain from CICC last year to manage its IPO, as well as his newly appointed veteran HRBP Suo Chao and Ge Yuesheng, who is both a shareholder and a new supervisor.

An insider revealed that after Wu Jihan held the general meeting, he began to discuss with shareholders how to negotiate with Zhan Ketuan so that he could leave the company. So far, Zhan Ketuan, who was expelled from the team, has not made any statement. Tencent News "Qianwang" called his mobile phone several times, but was hung up. However, a person close to Zhan Ketuan revealed that Zhan has begun looking for a lawyer and is ready to resort to legal action.

Behind the strong comeback is the concentrated outbreak of irreconcilable contradictions between Wu Jihan and Zhan Ketuan over the company's development ideas. After starting with mining machines and then building leading advantages in mining pools, mining farms, Bitcoin Cash and other fields, the two co-founders of Bitmain had differences in the future direction. Zhan Ketuan insisted on cutting the computing power advantage accumulated in the mining field into the AI ​​field. However, the huge investment in unfamiliar fields has made Bitmain "support AI with mining", and the main business continues to transfuse artificial intelligence research and development, which has led to stagnation of the main business, loss of personnel and other problems.

"Last year, the two began to have more and more differences. Later, due to the poor blockchain market and setbacks in the listing, President Han (referring to Wu Jihan) chose to avoid it, let Zhan Ketuan lead the entire company, and retired himself." A person close to Bitmain's senior management described to Tencent News "Qianwang" that after Zhan Ketuan stepped into the spotlight, the situation did not improve. Even in 2019, as the market rebounded, Bitmain's new generation of mining machine chip research and development and manufacturing have been slow. Shenma Mining Machine, a rising star in the mining machine market, has become a strong competitor, while it has been surpassed by CoinIn in terms of mining pools. However, Zhan Ketuan is obsessed with the development of AI business and interferes with the sales department, the core department of mining machines. At the same time, because he is not good at communication, does not have much mass base but has a tough hand, there is a lot of resentment within the company.

External shareholders are also anxious. In Bitmain's financing in 2017, investors and its management signed a bet agreement to go public within five years. Now that its peer Canaan Creative has officially submitted its prospectus and is about to go public on Nasdaq, Bitmain, which has also failed in its Hong Kong listing, still faces many uncertainties in its road to listing.

Tencent News "Qianwang" learned exclusively from multiple sources that a week before Wu Jihan launched this "coup" raid, Bitmain had secretly submitted an application for listing to the SEC, with Deutsche Bank as the sponsor. People familiar with the matter revealed that from the initial target of Hong Kong stocks to the current US stocks, the IPO process of Bitmain has always been led by Wu Jihan and CFO Liu Luyao, with less involvement from Zhan Ketuan.

In order to increase the chances of success for its listing in the United States, Bitmain even hired Zheng Hua, the former chief representative of Nasdaq in China, as a consultant to provide advice and suggestions.

Wu Jihan's strong return means that if he gets the support of shareholders, Bitmain will focus on the blockchain industry, where it has the most advantages, regroup in the mining machine and mining pool business, and launch an impact on the US stock market.

"Coup" raid

On October 29, when Canaan, the second largest mining machine manufacturer, officially submitted its prospectus to the SEC and embarked on the road to an IPO on the US stock market, Bitmain, the industry leader, launched an internal personnel "coup."

Wu Jihan sent a very strong email to all employees at noon, announcing the decision to remove Zhan Ketuan from all positions at Bitmain, effective immediately. No Bitmain employee is allowed to follow Zhan Ketuan's instructions or attend meetings convened by Zhan Ketuan. If there is any violation, the company will consider terminating the labor contract depending on the severity of the violation; if the company's economic interests are damaged, the company will pursue civil or criminal liability in accordance with the law.

The timing of this raid coincided with the 2019 Shenzhen CPSE, where Zhan Ketuan led a team to participate and released new products one day before the opening of the CPSE on October 28. Security is one of the most widely used fields of AI at present, and it is also the direction that Zhan Ketuan insisted on developing AI, so he attaches great importance to it.

Early in the morning of October 29, after receiving the signal that he was about to be dismissed, Zhan Ketuan immediately returned to Beijing, but his access to the company had been stopped.

At the general meeting of all employees convened by Wu Jihan, Wu Jihan started from the founding of the company, explaining the differences in equity and voting rights between the two, as well as the contradictions in the strategic direction of the company. He also pointed out that the chip investment decision made by Zhan Ketuan in 2018 consumed a lot of manpower and material resources of the company, and also caused direct losses of US$1.5 billion.

"The one-hour meeting sounded like a quarrel between a couple, about what I paid for and what you did wrong." One employee described it this way. However, in terms of the choice of the two co-founders, he still stood on Wu Jihan's side, believing that a series of actions by Zhan Ketuan after he became chairman in March had caused great harm to Bitmain. "Both of them have awkward personalities, but Wu Jihan's handling is more popular and more recognized by customers when it comes to external matters."

"Of the two co-founders, Wu is more like the spiritual leader of Bitmain. He has good logic and is the earliest evangelist of Bitcoin. Zhan's strengths are more concentrated in the field of technology, but he is more arbitrary and not good at speaking. He believes in Buddhism and traditional Chinese medicine. People inside the company feel that they can't understand him very well, so he does not have the reputation of Wu Jihan."

An insider of Bitmain who has frequent contact with Wu Jihan and Zhan Ketuan commented on the reputation of the two founders. He cited Yang Zuoxing, the founder of Shenma Mining Machine, who now poses a threat to Bitmain. After developing the most popular mining machine Ant S9 for Bitmain, Zhan Ketuan did not fulfill his promise to Yang Zuoxing and did not communicate well, which led to Yang Zuoxing's departure in anger.

Differences are hard to resolve

Wu Jihan and Zhan Ketuan both graduated from prestigious universities, Wu Jihan graduated from Peking University and Zhan Ketuan graduated from the Chinese Academy of Sciences. According to the description of senior people in the early cryptocurrency circles, the two hit it off after meeting by chance on the street in 2013, and developed an ASIC mining machine suitable for Bitcoin mining, and later established Bitmain, which became a giant in the mining machine and mining pool industry.

But in 2018, the two began to have differences over the direction of the company's development, which gradually became irreconcilable. Zhan Ketuan objected to Wu Jihan's big move on Bitcoin Cash (BCH), and when the overall market of digital currencies turned cold, he hoped to open up a new business, that is, to use the computing power technology accumulation of Bitcoin mining machines to replicate the computing power experience in mining to the world's most cutting-edge technology - artificial intelligence.

But AI is obviously a business that requires huge investment but has little obvious benefits. The three mining machine manufacturers, especially Bitmain, are currently adopting what the industry considers to be "using mining to support AI", using the profits from mining machine sales to subsidize the research and development of artificial intelligence. In a previous interview, Zhan Ketuan also revealed that Bitmain has 300 people working on AI chip research and development, which exceeds the size of the research and development team for Bitcoin mining chips.

However, in the field of AI chips, mining machine manufacturers are facing a very strong lineup of opponents. Top players such as Google, AMD, and Nvidia should not be underestimated in terms of R&D funding support, technology, and data accumulation.

As the investment in AI increased, Zhan Ketuan suddenly launched an attack at the end of 2018, demanding that the management team choose one side. At the time when the cryptocurrency was at its lowest point, Bitmain's IPO in Hong Kong stocks hit a wall. After several months of internal negotiations, Wu Jihan resigned from all positions and only remained as a director of the company. Zhan Ketuan became the chairman and Wang Haichao became the CEO. They also announced that the company would focus on digital currency and artificial intelligence chips as well as products and services based on them.

According to Tencent News "Qianwang", this organizational structure adjustment was strongly advocated by Zhan Ketuan, and the company's strategic direction is also dominated by the artificial intelligence direction that Zhan Ketuan is responsible for, while Wu Jihan is only responsible for blockchain-related businesses. Subsequently, Zhan Ketuan launched drastic reforms and personnel changes, and led a new equity incentive framework, planning to go public in the United States.

However, when the cryptocurrency market rebounded in the first half of 2019, the shipments of Shenma Mining Machine, founded by Yang Zuoxing, who had left Bitmain, began to suppress Bitmain. Some of Zhan Ketuan’s policies towards major mining machine customers also attracted criticism, causing more orders to flow to competitor Shenma.

In addition to its most advantageous mining machine business, Bitmain's leading position in the mining pool business has also been overtaken. The CoinIn Mining Pool, which was also founded by Zhu Yu and others who left Bitmain, has become the market leader.

The company's main business was overtaken by competitors, causing internal instability. A senior employee of the sales department told Tencent News' "Qianwang" that due to the slow response in the research and development of the new generation of chips, "the competitor that was beaten half to death before is now alive again."

The market advantage was lost, and greater conflicts intensified during the internal structural adjustment. According to several employees, Zhan Ketuan began to gradually implement the second annual organizational structure adjustment in August, with multiple departments swapping with each other, and many personnel arrangements that employees were confused about. Many old employees, even business leaders, were transferred to new departments and reported to their less experienced superiors, causing a large number of old employees to resign.

Therefore, at the meeting held by Wu Jihan at noon on October 29, when he announced that the second organizational structure adjustment officially implemented on October 20 would be suspended, the applause was the loudest. Many employees described it as: "Everyone's mood is like the New Year."

However, even if the unilateral announcement of the removal of Zhan Ketuan from all positions and the suspension of his access to the company was made, people close to Zhan Ketuan revealed that he was already looking for lawyers to fight back. According to Bitmain’s prospectus in 2018, Zhan Ketuan holds 36% of Bitmain’s shares and is the largest shareholder. Wu Jihan is the second largest shareholder, holding 25.25%. Zhan Ketuan holds 60% of the Class B voting rights held by the two.

However, some insiders of Bitmain said that in 2018, Zhan Ketuan, Wu Jihan and other management and investors signed a new gambling agreement. According to the terms, in the latest shareholding details, Zhan Ketuan's shareholding ratio has dropped to more than 20%, and he has also lost his veto power. Neither Wu Jihan nor Zhan Ketuan responded to whether this statement was true or not.

The long road to listing

Tencent News' "Qianwang" learned exclusively after multiple sources that a week before Wu Jihan launched this "coup" raid, Bitmain had secretly submitted an application for listing to the SEC, with Deutsche Bank as the sponsor.

When Bitmain was trying to IPO in Hong Kong, the biggest obstacle was the issue of suitability for listing. On January 23, 2019, at the World Economic Forum in Davos, Hong Kong Exchanges and Clearing Limited (HKEX) President Charles Li said in an exclusive interview with Tencent News’ Periscope, “For IPOs, the core principle of HKEX is suitability for listing. Is the business model introduced by the proposed listed company to investors suitable for listing? For example, in the past, it made billions of dollars through business A, but suddenly said that it would do business B in the future, but there is no performance yet. Or business model B is better, then I think the business model A that you used for listing is not sustainable. Also, the regulators did not care before, but later began to care, then can you still do this business and make this money?”

The hidden meaning is obvious. Whether it is the mining machine business that previously attracted money or the AI ​​business that it wants to transform, Bitmain cannot meet the "listing adaptability" proposed by Li Xiaojia.

"The blockchain industry itself is not easy and full of controversy. There are scammers and idealists, geeks and speculators. It has been five years since the emergence of a Bitmain, and there may not be a second one in the next ten years." A practitioner named Zhang Li said in his public account. As a representative of the blockchain industry, after the IPO suspension, ensuring sufficient cash flow to get through the long winter of the industry has become a top priority.

According to the SEC process, when switching from Hong Kong stocks to US stocks, generally after submitting the listing application, there will be three rounds of inquiries. After the answers meet the regulatory requirements, the formal prospectus can be submitted, and then the company will be officially listed after the inquiry and other procedures. The whole process takes at least 1-2 months.

Tencent News' "Qianwang" exclusively learned that in order to increase the chances of success for this listing in the United States, Bitmain even hired Zheng Hua, the former chief representative of Nasdaq in China, as a company consultant to provide advice.

But this does not mean that the road to listing is smooth. Someone familiar with the listing process once told Tencent News "Qianwang" that the SEC has no biased position on blockchain business, but pays more attention to professional and technical issues, so the SEC's inquiries will be more professional and more focused. She believes that Bitcoin Cash BCH, which was forked from Bitmain in 2017, may become the biggest obstacle on its road to listing.