Key Highlights
- Canaan launched a $20 million share buyback using cryptocurrency holdings amid a sharp collapse in mining-machine revenue.
- The Bitcoin mining-equipment maker’s hardware revenue fell 96% year over year to $4.8 million in the third quarter.
- Canaan shares have declined about 75% this year, while its cryptocurrency treasury remains partly tied up.
Canaan Launches $20 Million Share Buyback
Bitcoin mining-machine maker Canaan has begun using its cryptocurrency holdings to repurchase its own shares as demand for mining equipment weakens and hardware revenue continues to collapse.
The company launched a $20 million buyback program on Tuesday under a broader $100 million authorization approved by its board on Nov. 6. Canaan management said it intends to pursue additional repurchases more actively as funds become available.
Canaan’s shares have lost about 75% this year through Wednesday’s close, according to data. The decline comes as the company faces sharply weaker operating conditions in its core mining-hardware business.
Mining-Hardware Revenue Falls 96%
Canaan’s hardware business generated $4.8 million in third-quarter revenue, down from $118.6 million a year earlier. The 96% decline reflected weaker demand and lower selling prices, which the company identified as the main factors behind the drop.
By comparison, Canaan’s own cryptocurrency mining operation generated $9.5 million during the quarter, nearly twice the revenue produced by its hardware business. The contrast highlights the growing importance of Canaan’s mining operations and digital-asset holdings as equipment sales weaken.
CEO Nangeng Zhang said Canaan was maintaining a long-term digital-asset treasury while “selectively monetizing cryptocurrency holdings to fund share repurchases.”
Crypto Sales Previously Funded Buybacks
Earlier company disclosures provide an example of how Canaan is financing its repurchase strategy. In an October update, Canaan said it had sold 3,952 ETH and 54.5 $BTC for approximately $13.9 million.
The company used $5.4 million of those proceeds to repurchase 13.6 million American depositary shares in late August. These American depositary shares represent Canaan’s shares traded on Nasdaq.
The newly launched program comes as much of Canaan’s remaining cryptocurrency treasury is tied up, limiting the portion of its digital-asset holdings that may be immediately available to fund further repurchases.
Why This Matters
Canaan’s buyback plan shows how a cryptocurrency-related company is using its digital-asset treasury to support shareholder returns while its primary equipment business contracts. The company’s third-quarter results also indicate that revenue from its own mining operation has become larger than revenue from selling mining machines.
Future repurchases will depend on the availability of funds and Canaan’s decisions about when to monetize cryptocurrency holdings. The company has authorized up to $100 million in buybacks, but it has initially launched a $20 million program and said its remaining treasury is substantially tied up.
Frequently Asked Questions
How much is Canaan initially spending on share repurchases?
Canaan launched a $20 million share buyback program under a broader $100 million authorization approved by its board on Nov. 6.
Why did Canaan’s hardware revenue fall?
Canaan said weaker demand and lower selling prices caused its hardware revenue to fall 96% year over year to $4.8 million in the third quarter.
How is Canaan funding the buyback?
Canaan is selectively selling cryptocurrency holdings. In an October disclosure, the company said it sold 3,952 ETH and 54.5 $BTC for about $13.9 million and used $5.4 million to repurchase 13.6 million American depositary shares.
