By
Mayowa Adebajo
April 15th, 2024
Canaan, one of the biggest manufacturers of bitcoin mining chips and devices, submitted a listing application to the HKEX.
Though Bitcoin has significantly lost in its price since December and its mining has become 60 percent less profitable in comparison with the previous year, the world’s second largest Bitcoin mining hardware supplier Canaan Inc. has announced its plans to raise $2 billion during its initial public offering (IPO) that will be launched in July.
Of course, you may be interested why the company has set such ambitious goals under the conditions that are rather difficult for mining sphere? Nevertheless, it is said that Canaan is going to present itself as a chip designer that focuses on blockchain technology and artificial intelligence development, but not as just a Bitcoin mining company.
“Their customers happen to be bitcoin miners. But they are a chip company, not a bitcoin company,” highlighted one source close to the deal that decided to stay anonymous.
Canaan manufactures ASIC (application specific integrated circuits) chips that are needed for Bitcoin mining. Traditionally, the group of the company’s customers includes large-scale miners that use thousands of machines functioning twenty-four hours per day. Currently, Canaan has a share of approximately 15% of the Bitcoin chips and hardware equipment market.
Canaan Inc. has already filed an application for an IPO with the Stock Exchange of Hong Kong (HKEX). The application also provides some general information about the company’s financial health. As it is reported in a financial statement, Canaan raised 1.3 billion yuan (which is approximately $204 million) in revenue in 2017, it means that the company showed a 3 percent year-on-year growth rate if compared with 2016.
Nevertheless, the rules that govern bitcoin impose some limits for the amount that can be mined at one time. Moreover, we have such a situation when there are more and more computers that are mining and as a result more and more work and electricity are required for getting an award in a form of tokens.
But this quickly rising capacity in the industry and volatility of the cryptocurrency market make it difficult to get profits. As it is estimated by experts, mining revenues are just 37 percent of their 2017 peak at nearly $17 million per day.
Cryptocurrency mining is under careful attention of the government in China. Nevertheless, in April, China Securities Regulatory Commission vice-chairman Jiang Yang, visiting Canaan’s factory, highlighted that it doesn’t matter “what the chip is used for, fundamentally you’re still a chip company”. Yang also expressed his hope that Canaan would get an approval to list in China.
According to experts, there are rather good chances that investors will buy into Canaan’s IPO, as many of them may view it as their chance to get closer to cryptocurrencies.
What is more, if this IPO is successful, it will be able to encourage other cryptocurrency-related firms to list. But the results of this offering will partially depend on the price of bitcoin over the next months.