The second Bitmain? Canaan Technology's executives quit, insiders say management is in a power struggle

Source: Science and Technology Innovation Board Daily

"Science and Technology Innovation Board Daily" (Reporter Chai Gang) reported that as the former second largest Bitcoin mining machine manufacturer, even the internal fighting among the management is learning from the "big brother" Bitmain?

Recently, Hangzhou Canaan Creative Information Technology Co., Ltd. has undergone industrial and commercial changes. The former directors Kong Jianping, Sun Qifeng, Li Jiaxuan, and the supervisor Tu Songhua have withdrawn from the main personnel, and Meng Lu has been added as a supervisor. At the same time, Zhang Nangeng was changed from "Chairman and General Manager" to "Executive Director and General Manager", and the corporate liaison was also changed from Finance Zhang Jing to Zhang Ning.

Several people familiar with the matter told the Science and Technology Innovation Board Daily reporter that this was due to infighting among the management. Zhang Nangeng in Beijing was fighting for control with the "Hangzhou Gang". Currently, the "Hangzhou Gang" has been marginalized and the official seal is also controlled by Zhang Nangeng. Canaan Technology may become the second Bitmain.

It is revealed that the company has recently integrated personnel in various business lines, but has not yet carried out large-scale layoffs. The reporter asked Canaan Technology for confirmation, but the relevant person in charge did not respond positively.

In fact, there were signs of divisions in Canaan Technology's management team. In January 2019, Canaan changed its business registration, and Liu Xiangfu, one of the company's three early co-founders and a director, withdrew from the ranks of senior executives. At the same time, Qin Fengling, the supervisor, was replaced by Tu Songhua, the former director of public affairs.

According to the prospectus submitted by Canaan to the Hong Kong Stock Exchange, Liu Xiangfu holds a 17.61% stake and is one of the company's actual controllers as well as the company's core technical personnel. He and the other two founders, Zhang Nangeng and Li Jiaxuan, control the company through a unanimous action agreement.

According to previous media reports, Liu Xiangfu's resignation from the board may be due to his disagreement with the company's overall strategic development: Unlike its competitor Bitmain, Canaan does not mine or operate mining pools, and most executives hope to maintain the status quo and continue to build the company into a manufacturer focused on cryptocurrency mining and artificial intelligence chips in order to better achieve an IPO in the future. However, Liu Xiangfu disagrees with this.

Although Liu Xiangfu's withdrawal is far less eye-catching than the infighting between Bitmain's Wu Jihan and Zhan Ketuan, it is bound to have a certain impact on Canaan.

As for Zhang Nangeng's "de-Hangzhouization" this time, an informed source told the reporter of "Science and Technology Innovation Board Daily" that perhaps Zhang Nangeng saw the internal strife in Bitmain and was worried that he would become the second Zhan Ketuan.

Zhang Nangeng is the founder of Canaan. As early as 2010, when he was studying for a doctorate in computer science at Beihang University, he began to study Bitcoin mining machines. Later, he simply dropped out of school to devote himself to the research and development of mining machines.

In April 2013, Zhang Nangeng and Li Jiaxuan founded Beijing Canaan Creative Information Technology Co., Ltd. In December of that year, Liu Xiangfu joined. In April 2015, Kong Jianping and Sun Qifeng joined. In September 2015, Canaan "moved its capital" to Hangzhou and changed its name to "Hangzhou Canaan Creative Information Technology Co., Ltd."

Later, the equity and management changed several times. As of the end of 2019, Li Jiaxuan, Zhang Nangeng, Kong Jianping, Liu Xiangfu and Sun Qifeng held 15.2%, 15%, 11.3%, 9.5% and 5.5% of the shares respectively.

As of the close of July 8, Canaan Technology's stock price was $1.96, a 84% drop from its opening price of $12.6 on its first day of listing. In particular, it has accelerated its decline since May 15, with a 67% drop in less than two months. During this period, the company's six-month lock-up period expired in late May.

On May 14, US research firm White Diamond released a short-selling report on Canaan Inc., saying that its market value of $850 million at the time was inflated and would fall by 80%-90% in the future. It believed that its new generation of mining machines were not competitive and that its attempt to transform into AI chips would not succeed. Prior to this, on February 20, another short-selling firm, Marcus Aurelius Value, accused Canaan Inc. of concealing related transactions, frequent problems with customers and dealers, and an unsustainable business model.

On February 21, Schall Law Firm, a shareholder rights litigation firm in Los Angeles, accused Canaan Inc. of violating securities laws and investigated claims on behalf of investors. Not long after, another law firm named Rosen filed a lawsuit against Canaan Inc. on behalf of investors who participated in its IPO.