China’s second largest cryptocurrency mining hardware manufacturer Canaan Creative is all set to launch an IPO in Hong Kong. The company intends to get listed on the Hong Kong Stock Exchange and expects to raise $1 Billion with this Initial Public Offering. If all goes well, Hangzhou-based Canaan Creative will become the first blockchain startup to get listed on the Hong Kong Stock Exchange.
Canaan Creative is the biggest rival to Bitmain in China. The company had been considering to launch this IPO either in the US markets or in Hong Kong. However, it appears that they are almost certain to be doing this in Hong Kong now - but are yet to take the final call on it, reports from the South China Morning Post indicate. Canaan Creative’s chairman Kong Jianping had also stated in the past that they would also consider a listing in mainland China, perhaps at the Shanghai Stock Exchange.
Canaan’s Billion-Dollar Ambitions
Canaan’s Billion-dollar ambitions are indeed quite high. The company was evaluated at $523 Million in 2016 after a Series-A funding of $43 Million. However, if Canaan Creative manages to raise $1 Billion with this Hong Kong IPO, it would mean that their valuation would be doubled!
Canaan is a major name in the world of Bitcoin mining hardware - but the company has also been working towards their software division. Cnaan Chairman Kong Jianping had commented during a phone interview to South China Morning Post in April that the software business is going to be one of their key focal points moving forward.
Haunted by Failed Listing Attempts
Interestingly, this is not the first time that Canaan has tried an IPO attempt. The company has tried out twice in the past to get listed in China - but has failed on both occasions. When they first tried getting listed, they attempted so on the Chinese New Third Board Market - which does not have a strict entry barrier for startups. However, for reasons undisclosed, the listing was denied.
Canaan tried once again, to get listed via a backdoor listing method, following the announcement of Luyitong acquiring Canaan Creative for $485 Million. However, that was again denied as regulatory authorities stated that this is an over-priced deal. This will now be their third attempt to get listed - and this time on the Hong Kong Stock Exchange. It would be interesting to see how the company performs this time.
China’s Crypto-Hardware Business: Cnaan vs Bitmain
To understand their scale of operations - Canaan stated that they produce 20% of all the mining rigs in global use. Unaudited reports from last year indicate that Canaan had made a profit of $64 Million last year. Interestingly, Canaan has stated that they expect their year-on-year profit to rise by over 700% - as they target a profit of 10 Billion Yuan ($1.59 Billion) in 2018-19.
While Canaan accounts for 20% of all the mining rigs across the world, their biggest competition is with China’s Bitmain - which accounts for most of the other 80%. Bitmain is a global giant when it comes to cryptocurrency mining hardware devices and the company has been making massive profits. As opposed to the $64 Million made by Canaan Creative, Bitmain made a profit of $4 Billion over the same time period of 2017-18. Bitmain is also looking forward to setting up business in the US via a Washington-based subsidiary firm 'Ant Creek'.
Much of Bitmain’s success can be attributed to the fact that Bitmain also creates hardware miners for other cryptocurrencies while Canaan focuses only on Bitcoins. Bitmain recently created the first-ever ASIC mining devices for Ethereum, Monero and ZCash - currencies which were previously considered to be ASIC-resistant. This has sparked off a global debate of how sustainable is ASIC resistance.