Canaan, Inc.

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Canaan, Inc.
Canaan Creative logo.jpg
Founded 2013
Headquarters Hangzhou, China
Key People N.G. Zhang, Chairman and CEO; Quanfu Hong, CFO
Employees 300
Products Application-specific integrated circuits for blockchain and artificial intelligence application
Twitter @canaanio
Facebook Canaan-Inc-888877487972587
Website Canaan Creative Home

Beijing-based Canaan, Inc. is the second-largest producer of application-specific integrated circuits (ASICs) for blockchain applications in the world. Canaan, Inc. was known as Canaan Creative before its American stock exchange listing.

Overview

According to Frost & Sullivan, an independent market research firm, Canaan Creative ranked second in the share of hashing power in 2019 attributable to the bitcoin miners it has produced. Its main brand of miner is "Avalon." Canaan Creative is behind Bitmain in Frost and Sullivan's ranking. Also according to Frost and Sullivan as reported by Canaan Creative, the company has been a leader in developing artificial intelligence technologies with regard to "Risc-V architecture" which Canaan Crative claims "is suitable for IoT (Internet of things) hardware adoption due to its flexibility and open-source characteristics."[1]

Nasdaq listing

Canaan Creative filed a draft F-1 under its official name, Canaan Inc., with the U.S. Securities and Exchange Commission (SEC) to register its initial public offering (IPO), a proposed issuance of American Depository Shares, on July 23, 2019.[2] The final F-1 was published by the SEC on October 28, 2019. Canaan Creative sought to raise $400 million in a fourth quarter 2019 offering of 126 million shares. Its shares will trade on Nasdaq stock exchange in the U.S.[3]

Chinese media reported at the time that the company had a valuation of between $2 and $3 billion. The company reported a loss of $45.8 for the first half of 2019 after full year profit of $8.3 million in 2018.

The company said that it planned to use the proceeds from the issuance for the following purposes: research and development of ASICs for artificial intelligence as well as blockchain applications, international expansion, and optimization of the company's supply chain.[4]

Between its registration announcement on October 29 and its IPO, Canaan Creative lost its lead underwriter, Credit Suisse Group AG, due to concerns that the offering would meet with disappointing sales.[5] Canaan Creative sold $90 million worth of American Depository Shares in a scaled down IPO on November 20, 2019. Each share was offered at $9, the bottom of Canaan Creative's previously indicated range of $9 to $11.[6]

The company, its chairman N. G. Zhang, and the various underwriters of the stock offering were sued by an individual shareholder for filing false and misleading statements with the SEC in its original filings. Among other things, the suit alleges that Canaan's characterizations of its strategic partnerships as well as its business model for its artificial intelligence initiatives were false. The suit was filed in Oregon federal district court on March 4, 2020. The suit did not specify the amount of damages sought. [7]

The complaint in the law suit echos and, at times, directly refers to an advisory service called Marcus Aurelious Value, which published a blog post titled Canaan Fodder in February that was highly critical of Canaan. The company said it was short the stock at the time of the blog post.[8]

Share buyback

After its shares consistently traded below their $9 IPO price, the company announced on September 8, 2020 that it's board of directors had approved repurchasing approximately 10% of the shares outstanding. Shares in Canaan Creative were trading at about $2 per share at the time of the announcement.[9]

Losses

In a business environment that included the May 11, 2020 bitcoin halving, the global 2020 coronavirus pandemic and an accelerating bull market in bitcoin, the company reported second and third quarter unaudited net losses of $2.5 million and $12.7 million, respectively. Hinting at a potential turn away from bitcoin mining and toward chip design for artificial intelligence, Zhang said “During the third quarter of 2020, we remained undeterred by the pandemic to strengthen our research and development capabilities, expand our AI business, and execute new business initiatives." and ". . . we have also accelerated the monetization of our AI business through our partnerships with a number of companies in various industries . . ." in addition to pointing to the newest Avalon miner.[10] The share price, which had recovered from its September lows to trade at over $7 per share the previous week, fell about ten percent when the third quarter loss was announced on November 30.[11]

Return to profitability

In June 2021, the company reported that it had a first quarter profit of $200,000 and that its outlook for the second (then current) quarter was likewise positive. Canaan said at the time that it had received orders for 1,000 or more rigs from 29 different customers so far in the quarter.[12] The share price for Canaan was $10.15 around noon on June 2, 2021.[13]

References