In brief

  • Canaan is spending $10 million to buy back shares, which currently cost about $2.
  • The maker of Bitcoin mining hardware took in $90 from a 2019 IPO, in which shares sold for $9.
  • The Chinese company reported a year-over-year decline in net revenue of 26% in the second quarter.

Last November, Canaan, the Chinese company that makes computer chips and other hardware for Bitcoin mining rigs, priced its shares at $9 on the Nasdaq stock exchange as part of a $90 million initial public offering.

Now, with the price below $2 and near an all-time low, the company will spend up to $10 million to buy shares back. 

According to a company press release, “The number of [American Depositary Shares] repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, price, trading volume and general market conditions, along with Canaan’s working capital requirements and general business conditions.”

Canaan’s unaudited second-quarter financial results, released last week, shed some light on the hardware maker’s thinking. It reported year-over-year decreases in total computing power sold and total net revenues of 18.2% and 26.3%, respectively. 

At the time, CEO Nangeng Zhang blamed the decline on the COVID-19 pandemic and Bitcoin price volatility associated with the Bitcoin halving in Maywhen block rewards for mining were cut in half. 

The COVID-19 outbreak, which originated in China, was already trending downward there by February, before the pandemic in the US and much of the rest of the world had yet spiked. That helps explains why Canaan’s April-through-June earnings seem just fine. Quarter-over-quarter net revenue was up 160.9% to $25.2 million.

CFO Quanfu Hong said, “Looking ahead, we will continue to invest in those areas that can strengthen our product offerings, streamline our operations, and solidify our market leadership.”

He added that the company was “confident in the underlying strength of our fundamentals and optimistic about the long-term growth prospects of our business.”

If that’s true, with the share price hovering at low levels and Chinese industry emerging from the pandemic, now is the time for Canaan to invest in itself.