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World's Second Largest Bitcoin Mining Company Raises $90M in US IPO

The world’s second-largest bitcoin mining equipment producer, Canaan Inc., raised $90 million during its initial public offering (IPO).

According to Bloomberg, the Chinese company based in Hangzhou sold 10 million American depositary shares at the $9 apiece on Nov. 20. The filings with the US Securities and Exchange Commission (SEC) show that the shares have been marketed for $9 to $11.

The mining equipment firm had originally planned to raise around $400 million in October, however, there was a minor setback. The company lost its lead underwriter, Credit Suisse Group AG before the deal was launched as shown in the filings.

The IPO was led by Citigroup Inc., China Renaissance Holdings Ltd., and CMB International Capital Ltd. The shares will be available for trading starting Nov. 21 on the Nasdaq Global Market under the ticker CAN.

A week before the IPO, the mining company suffered a huge blow, resulting in a much lower amount raised than expected, which was around $200 million to $400 million.

Earlier this year, China had plans to ban bitcoin mining. However, with the recent pivot with Chinese President Xi Jinping endorsing blockchain, the National Development and Reform Commission deleted Bitcoin mining and cryptocurrency mining from the list of industries that China should ban. This resulted in a key development for Canaan as well as the fact that Bitcoin has been increasingly difficult to mine.

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Canaan Deploys 10,300 Mining Machines in Kazakhstan, Expanding its Mining Operations

Canaan, a Chinese Bitcoin mining manufacturer engaged in independent AI chip research and development as well as providing high-performance computing services, announced that it has signed strategic cooperation agreements with a number of crypto mining companies and plans to launch joint mining operations in Kazakhstan.

According to the official announcement, as of the end of 2021, a total of 10,300 AvalonMiners have been invested in Kazakhstan.

Zhang Nangeng, Chairman and CEO of Jianan Zhizhi, said that:

“The deployment of over 10,000 mining machines not only deepens our collaboration with leading local mining farms, but also marks our great strikes in our cultivation of the Bitcoin mining business.”

“As we expand our involvement further down the Bitcoin value chain, we are enhancing the depth and width of our global presence while solidifying our business operations. Joining hands with mining firms, we are excited to leverage each of our respective strengths and resources to maximize profits and capitalize on the growth of the digital assets industry,” Zhang added.

Canaan stated that on December 22, 2021, the last batch of mining machines deployed by the company in the first phase of Kazakhstan has been successfully launched.

Due to China’s crackdown on crypto mining, many bitcoin miners have shifted their base out of China.

As the increase of illegal coal extraction prompted China’s latest crackdown on cryptocurrency mining. As a result, the Communist party-led administration forced them to crack the whip because these illicit activities endangered people’s lives and undermined the government’s ambitious environmental objectives on May 25, 2021.

The multinational semiconductor company Bitmain Technology Holding, therefore, announced that from October 11, 2021, Bitmain’s Antminer will stop shipping to mainland China to comply with a series of local bans on strict crackdowns on cryptocurrencies.

As China is stifling the crypto mining industry, neighbouring Kazakhstan is eager to use its rich coal resources and cheaper labour to fill up companies that had previously mined in Chinese mining pools.

The government of Kazakhstan is making plans to attract $738 million in investments related to cryptocurrencies and digital mining activities set up with the nation over the next three years.

After six months of recovery, the hash rate of the Bitcoin network hit a record high on January 2.

Chinese Mining Firm Canaan Inc Doubles Revenue Despite Bitcoin Ban

Canaan Inc, a Chinese cryptocurrency mining giant and computing resource provider, has reported a better than expected revenue, despite the ban on crypto mining and transaction activities in China.

As announced by the company, its total revenues came in at RMB1,652.7 million ($246.7 million), a figure that represented an increase of 21.9% from the RMB1,356.1 million it reported in the first quarter of 2022. This impressive revenue also comes in as a 52.8% increase from the RMB1,081.8 million recorded in the same period of 2021.

What was most striking about Canaan Inc’s revenue is the fact that its computing power plunged lower in the second quarter. Per the figures published, the total computing power sold was 5.5 million Thash/s, representing an increase of 27.5% from 4.3 million Thash/s in the first quarter of 2022 and a decrease of 7.7% from 5.9 million Thash/s in the same period of 2021.

Though it is trading publicly on the Nasdaq Global Select Market, Canaan Inc is a Chinese company with its headquarters in Beijing. The firm’s Q2 performance has not really shown any form of dearth in operations and revenue despite the hostility of the Chinese government towards crypto activities as well as the overall impact of the crypto winter.

“The solid topline performance primarily resulted from the sequentially increased computing power sold and relatively high average selling price we secured with contract sales from previous quarters where the Bitcoin price was at a higher level. As the Bitcoin price further decreased in the second quarter, we responsively lowered our product price for spot sales to shoulder the pressure with our clients,” said James Jin Cheng, Chief Financial Officer of Canaan.

While Canaan’s financials show it is cash flow positive, the situation was notably different for other key stakeholders in the crypto mining ecosystem like Core Scientific, which sold more of its mined BTC to offset some of its debts and liabilities.

Canaan's Q4 2022 Revenue Declines by 82.1% YoY to $56.8M

Chinese Bitcoin miner and manufacturer of application-specific integrated circuit (ASIC) mining machines, Canaan, has reported an 82.1% YoY revenue decline to $56.8 million in Q4 2022, according to a new filing with the U.S. Securities and Exchange Commission on Mar. 7. This represents a significant drop in revenue for the company, which sold 1.9 million terahash per second worth of computing power for Bitcoin mining during the quarter. However, this figure does not account for lower ASIC prices and represents a 75.8% decline from Q4 2021.

Despite the decline in revenue, Canaan’s mining revenue improved by 368.2% YoY to $10.46 million. Nangeng Zhang, Chairman and CEO of Canaan, said that the company had been “diligently improving and developing our mining business” to mitigate demand risks during the market downturn. This effort yielded more progress in early 2023, with 3.8 EH/s hash rate installed for mining as of the end of February. Accordingly, the company has made decisive investments in bolstering its production capacity and expanding its mining operations to more varied geographic regions that offer advantageous conditions.

However, the company’s net income swung to a $63.6 million loss in Q4 2022 compared to a profit of $182.0 million in Q4 2021. According to Jin Cheng, Chief Financial Officer of Canaan, the loss was due to inventory write-downs and research expenses related to its new fleet of ASICs. He said, “Considering very soft market demand and low selling price, we incurred an additional inventory write-down of RMB205.3 million, which also dampened our gross margin. In conjunction with one-time higher research and development expenses relating to the tape-out for our A13 series, our bottom line suffered losses during the quarter.”

For the full year, Canaan’s revenue decreased by 13.8% to $634.9 million, mainly due to better industry conditions in Q1 and Q2 2022. Despite the decline in revenue, the company has a strong balance sheet, with $706 million in total assets compared to $67 million in total liabilities.

Looking ahead, Canaan expects to face continued market challenges and volatility, but remains committed to developing its mining business and investing in new technology to drive long-term growth. The company’s recent investments in production capacity and geographic expansion suggest that it is well-positioned to capitalize on any future recovery in the Bitcoin market.

Bitcoin Miner Canaan Reports $73.9M Revenue in Q2

Canaan Inc. (NASDAQ: CAN), a leading provider of high-performance computing solutions, unveiled its unaudited financial metrics for the second quarter of 2023 on August 29. In the face of market headwinds, the company saw a notable 44.2% sequential growth in total computing power sold, hitting 6.1 million Thash/s. Yet, the organization is contending with regulatory shifts in Kazakhstan and an ongoing legal battle in the United States, factors that may affect its future operations.

Financial Overview

For the second quarter of 2023, Canaan reported revenues of $73.9 million, a rise from the first quarter’s $55.2 million but a decline from $245.9 million in the corresponding quarter of 2022. Mining-related revenue experienced a substantial surge, climbing to $15.9 million, up 43.3% from $11.1 million in the previous quarter. Despite these revenue increases, the company logged a net loss of $110.7 million, largely due to non-cash charges such as inventory write-downs, which amounted to $54.7 million.

Regulatory Challenges

In July 2023, Kazakhstan introduced new licensing rules for digital mining activities. Canaan has temporarily shut down approximately 2.0 Exahash/s of its mining computing power in the country and is in the process of obtaining a specialized license. The company expects this suspension to continue into Q3 2023, affecting its bitcoin generation capabilities.

U.S. Legal Dispute

Canaan U.S. Inc., a subsidiary, is embroiled in a legal dispute with a U.S.-based partner over a breach of their Joint Mining Agreement. The disagreement involves issues ranging from installation failures to unreturned deposits and profits. With mediation proving unsuccessful, Canaan U.S. plans to proceed to arbitration.

Business Outlook

For Q3 2023, Canaan expects total revenues to be around $30 million, citing challenging market conditions. As of June 30, 2023, the company held cryptocurrency assets primarily comprising 1,125 bitcoins with a total carrying value of $28.8 million.

Analyst Take

Canaan’s Q2 results show resilience in a volatile market, but the firm is not without its challenges. Regulatory changes and legal disputes could hamper its growth trajectory. Investors should keep an eye on how the company navigates these hurdles, especially as it holds a conference call to discuss these financial results today at 8:00 A.M. U.S. Eastern Time.