China’s second-largest bitcoin miner is planning to launch an initial public offering (IPO) this summer with the stated goal of raising $2 billion, according to sources familiar with the matter. If successful, the public sale would be the largest the crypto industry has ever seen.
Canaan Creative submitted its IPO application to the Stock Exchange of Hong Kong (HKEX) on May 15, having previously short-listed the United States for its public sale. The Beijing-based miner has yet to comment on its plans, but sources say it seeks to raise between $1 billion and $2 billion.
The company aims to start trading shares in Hong Kong by July. Its application is still pending approval by HKEX.
Canaan controls roughly 15% of the global market for bitcoin mining chips. Revenues and profit surged last year as bitcoin prices topped $19,500 on major exchanges. Company financials reveal a seven-fold increase in profit last year to 361 million yuan ($56.67 million). Canaan’s customers are primarily large-scale miners with thousands of machines working 24 hours a day.
In May of last year, Canaan raised 300 million yuan ($43 million) in Series A funding with participation from Jin Jiang International Group and Baopu Asset Management, among others.
Mining Profitability in Decline
Canaan plans to go public at a time when mining profitability is in decline. Mining bitcoin is 60% less profitable today than it was in 2017, with retailers confirming a sharp decline in rig demand.
Sources familiar with the IPO say Canaan is marketing itself not as a bitcoin company but as a manufacturer of high-end chips. The company announced last year it was developing chips for artificial intelligence applications. In addition to bitcoin mining equipment, it is also focusing on other blockchain applications.
Speaking of Canaan, a source told Reuters that, “Their customers happen to be bitcoin miners. But they are a chip company, not a bitcoin company.”
Canaan’s IPO could transform the market’s perception of ‘bitcoin proxy stocks,’ a phrase used to describe indirect exposure to cryptocurrency by way of companies operating in the blockchain space. Examples include Nvidia, Longfin Corp and Riot Blockchain.
A successful IPO would likely encourage other blockchain companies to consider a public offering of their own. This would give investors more options to invest in the blockchain economy without having to own volatile cryptocurrencies.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.