Canaan Files for U.S. Public Listing

On October 28th, Canaan Creative filed for an initial public offering (IPO) in the United States. The Chinese cryptocurrency mining giant plans to raise $400 million, according to their filing with the Securities and Exchange Commission. Canaan would have the ticker “CAN” on the Nasdaq exchange, and this would make them the first Chinese mining firm to be publicly traded in the U.S. 

The Avalon Bitcoin miner maker is one of the world’s largest mining equipment manufacturers, and this represents their third attempt to go public. They had previously filed a $200 million IPO draft request in July, but the formal filing with the SEC only became public upon their recent filing. Before that, they filed to go public in mainland China and Hong Kong, and both of these efforts fell through due to shifts in market dynamics. 

$400 million is just a placeholder before the intended raise and proposed valuation amount are decided at a later date. With losses of $45.8 million for the first 6 months of this year and profits of $25 million in the first half of 2018, Canaan is subject to large swings in their performance. One key thing to note is that demand for Bitcoin mining rigs goes up after the price of Bitcoin goes up, so demand lags Bitcoin prices by 3 to 6 months. 

Filing in the U.S.

One might ask why Canaan would file in the U.S. when it has proven to be so unfriendly to crypto. A large part of this is the stability of the markets in the USA, and this serving as the perfect “bridge” for other crypto-related companies to eventually IPO. 

The Chinese crypto mining market consists of 3 main companies: Canaan, Bitmain, and Yibang International. Bitmain has previously had an IPO listing application on the Hong Kong Stock Exchange, but it expired in March and was replaced by a filing with the SEC in June of this year. 

In addition, Bitmain recently opened what they claim to be the world’s largest Bitcoin mining facility in Rockdale, Texas. This facility was developed in conjunction with the municipal district and DMG Blockchain Solutions, a Canadian Technology firm. 

The fact that Rockdale was so supportive of the development tells us that states with low energy costs who are in need of more tax dollars will become prime candidates for more mining farms in the future. 

Effect of the Flash Crash

Mining is entering this new heyday of investment just after experiencing a flash crash in the hash rate near the end of September. The 40% drop in Bitcoin’s network hash rate triggered a ton of news stories speculating on why it might have happened, but the market still isn’t clear on the reasoning. 

What is interesting is that these IPOs are occurring so shortly after the flash crash. Higher hash rates mean more competition between miners, and so a crash could serve as a signal for more opportunity coming up. 

The hash rate has recovered near its previous levels, which were hitting all-time highs before the crash, and that has likely triggered some miners into moving their hash power over to the Bitcoin Cash network. The resulting shifts in mining power for BCH has led to one single miner controlling 50% of the hash rate, which has destabilized the network’s confidence in BCH for the time being.