Chinese bitcoin player completes $90m IPO, endures bumpy debut

The company sold 10 million American Depository Shares (ADS) at $9.00 apiece, the bottom end of the indicative range, according to a filing. The stock opened at $12.60 on November 21 and at one point slipped to $8.68 before closing at $8.99. Blockchain development in China was recently endorsed by President Xi Jinping but Canaan's fortunes ultimately rise and fall in line with global bitcoin prices.

"As the bitcoin price fluctuates, we may adjust the selling price of bitcoin mining machines on a weekly basis, as customers are only willing to pay for machines based on their ability to recover their investment through mining bitcoins over a relatively short period of time," the IPO prospectus explains.

Founded in 2013, Canaan was the first to produce cryptocurrency mining machines incorporating a technology called application-specific integrated circuits (ASIC). It claims to be the second-largest designer and manufacturer of bitcoin mining machines globally. The devices it sold in the first half of 2019 accounted for 21.9% of the combined computing power of all machines sold globally.

In the first half of 2019, Canaan's revenue decreased 85% year-on-year to RMB289 million ($41 million) due to a drop in bitcoin prices. The company recorded a net loss of RMB 331 million. While revenue rose 106% to RMB2.7 billion in 2018, this was more than offset by a 212% increase in costs. As a result, net income fell 67% year-on-year to RMB122 million.

Canaan is now leveraging its ASIC expertise to manufacture chips used in edge computing. This might offer greater stability, but deliveries only started in September 2018 and revenue came to RMB275,200 in the first three months. The total for the first half of 2019 was RMB467,700. However, this amounts to just 0.2% of overall revenue, with sales of bitcoin mining machines amounting to more than 99%.

Canaan raised $43.5 million in 2017 from investors including Shanghai Baopu Investment, Hangzhou Tunlan Investment, and Hangzhou Jinjiang Group. They took a 9% stake, according to AVCJ Research. Canaan previously failed at both a listing in Hong Kong and a reverse merger in Shenzhen.

Bitmain, another major player in the bitcoin mining industry, pulled the plug on a Hong Kong IPO in March. The company suffers from the same bitcoin price volatility as Canaan, though the impact was exacerbated by its substantial cryptocurrency holdings.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• IPO
• Technology
• China
• TMT