Hong Kong-based Bitcoin mining company Canaan has ended up flat after its $90 million US IPO, at $8.99. The previous day, shares of the company were priced at $9.00. However, share value rose by 44% before it ended at its final IPO price.
Canaan was created in 2012 and is one of the chief competitors of the massive Bitmain mining company. The IPO was led by Citigroup, China Renaissance Holdings Ltd., and CMB International Capital Ltd. The shares are trading on Nasdaq under the ‘CAN’ ticker.
Canaan is one of the companies that create expensive hardware needed to mine Bitcoin. This hardware is valuable and even small changes in efficiency can result in huge profits for miners. The Bitcoin price also has a huge effect on these mining operations, and cannot be controlled. If it was to remain low for a sustained period, then these companies might not last.
Due to strict Hong Kong regulations, Canaan was forced to list its IPO in the USA, and the total amount turned out to be less than expected. The reasons given were that the company was not yet mature enough for an IPO due to transparency issues.
In its previous listings, Canaan had expected the size of the IPO to be in the region of $400 million. One of the reasons it may have listed for less is due to the fact that it lost its lead underwriter, Credit Suisse, right before the offering. The bank was unsure whether or not the company would secure an appropriate amount of orders. Canaan listed a loss of $33 million in the 9 months ending on 30th June.
The world of cryptocurrency mining is incredibly volatile and competitive right now. Bitcoin is expected to take off in 2020 and beyond due to global systemic pressure and a confluence of factors that will affect the existing monetary system. But mining companies need to take care of their finances and navigate a very hectic regulatory environment.
Many Chinese mining companies have listed their IPOs in the USA, due to the hard-line the region has drawn with regard to all things crypto-related. This year alone, 29 companies from the Honk Kong/China region have listed IPOs in the USA, raising over $3.33 billion.
Later this year, Credit Suisse will assist Alibaba with its Hong Kong share sale. Bitmain’s Hong Kong IPO application expired in March after a 6-month lag. The mining giant reported that it expected its IPO to list at $18 billion, a number which is rather optimistic. Some have questioned the robustness of the company’s finances.
As large as Bitmain is, Bitcoin mining is a volatile industry. According to its own prospectus, it lost $400 million in the second quarter of 2018. A leaked document revealed that it lost $500 million in the third quarter. On October 30th, it was revealed that Bitmain applied for a US IPO in a confidential SEC filing sponsored by Deutsche Bank.