Chinese bitcoin hardware company Canaan Creative is aiming to raise $400 million in an initial public offering, according to paperwork filed with the Securities and Exchange Commission.

Canaan makes application-specific integrated circuits, hardware often used for bitcoin mining or artificial intelligence applications. The company claims to be the second largest designer and manufacturer of its chip varietal in the world, according to its F-1 statement. Canaan has shipped 26,000 AI chips and modules since they’ve been released, and has 21.9 percent of global market share for bitcoin mining machines in the first half of this year according to its filing.

Canaan, which is based in Beijing, was founded in 2013 and was acquired by Shandong Luyitong Intelligent Electric in 2016 for $466 million, according to Crunchbase.

The company now wants to go public in the United States by listing on the Nasdaq exchange. Credit Suisse and Citigroup are among its underwriters.

But enough about the figures Canaan touts. Let’s get to the good stuff: the money.

Financial “Results”
Canaan is an odd company, financially at least. Normally when an enterprise goes public it has a few characteristics. Revenue growth, for example, is nearly always present. Canaan doesn’t have that. Expanding gross profit is another regular measure that we see in S-1 and F-1 filings. Canaan doesn’t have that either.

Falling losses? Canaan actually has the opposite. Shrinking costs? That’s not common, but perhaps firms that are contracting while losing money at least can show diminishing operating costs? Not Canaan.



You get the picture. In numerical form, Canaan put up revenue of $41.9 million in the first half of 2019, down a little over 85 percent from its year-ago result. That’s the worst revenue growth we’ve ever seen here at Crunchbase News.

Even worse, Canaan’s gross profit fell around 97 percent to just $1.6 million in H1’2019. Again, that’s the least good result we’ve ever seen. Against that miserable gross margin, Canaan had operating expenses of $49.3 million in the first two quarters of the year. As you can largely calculate in your head, the company lost $48.2 million during the six-month period.

Canaan once posted growth (the firm grew tidily between 2017 and 2018), even managing to post a profit in 2018 of $17.8 million against $394.1 million in top line. How things have changed.

The price of bitcoin and demand for cryptocurrency mining hardware is both variable and volatile. As other publications have pointed out, this can lead to uneven demand for new hardware. It seems that Canaan has wound up on the wrong side of a trend.

Cash, Ownership, Second Chances
Canaan had about $39.4 million in cash on hand at the end of the first half of 2019.

The company has a dual class structure, and each class A share will have one vote, while each class B share will have 15 votes.



Of the directors and executives, co-founders Jiaxuan Li and Nangeng Zhang have the most votes, with each holding roughly 16 percent of the shares. Principal shareholders Ouroboros Limited and Flueqel Limited also hold roughly 16 percent each.

This isn’t the first time Canaan has tried to go public. Three years ago, the company tried to go public in China through a reverse merger by buying a Chinese electric equipment maker, according to Reuters. It also filed for a Hong Kong float just last year, but neither plans panned out.

Let’s see if the third time’s the charm when it comes to getting the company public. We doubt it.