The first day of listing was hit by a huge shock: Canaan Creative, the world's second largest Bitcoin mining machine manufacturer, opened 40% higher and finally broke the issue price

On its first day on the public market, Canaan Creative, the world's second-largest bitcoin mining machine manufacturer, had a performance as tortuous as its path to a listing.

On Thursday (November 21), Canaan Creative officially landed on the Nasdaq under the name of Canaan Technology, with the code "CAN", opening at $12.6, a 40% increase from the opening, and rising to $13 during the day, with the largest intraday increase exceeding 44%. However, within half an hour of the opening price, it fell below the issue price and turned down, falling to $8.21 at the lowest, a drop of nearly 9%. By the midday session, Canaan Technology's decline narrowed significantly, and finally closed down 0.11% at $8.99.

Canaan Inc. raised 10 million American Depositary Shares (ADS) at a price of $9, which is at the lower end of the guidance range of $9-11. Based on the issue price, Canaan Inc.'s market value exceeds $1.4 billion, and the IPO raised $90 million, which is significantly lower than the planned financing scale of $400 million when it applied for listing at the end of October this year.

Although the financing was much smaller than initially expected, Canaan Creative's bumpy road to listing has finally brought some hope. Before going to the U.S. market, the Hangzhou-based mining machine giant had tried to list in mainland China or Hong Kong, but failed repeatedly.

In 2016, Canaan Creative tried to go public on the A-share market through a backdoor listing. Luyitong Electric, a GEM-listed company, announced that it had planned to acquire all of Canaan Creative's shares for RMB 3.06 billion. After repeated inquiries from the regulatory authorities, Luyitong finally gave up the deal.

In August 2017, Canaan Creative sought to be listed on the New Third Board. But a month later, domestic regulatory authorities began to step up efforts to rectify ICO and virtual currency chaos, and closed virtual currency exchanges in China. Amid the industry turmoil, the company also received multiple rounds of inquiries from the National Equities Exchange and Quotations, and finally in March of the following year, the company announced that it would voluntarily give up listing.

In May last year, Canaan Creative submitted an application for listing to the Hong Kong Stock Exchange, but failed to update the listing documents within six months, and the application automatically became invalid. The Hong Kong Stock Exchange once responded to the Bitcoin mining machine manufacturer, saying that it did not meet the core principle of the Hong Kong Stock Exchange, "listing suitability."

As a mining machine manufacturer, Canaan Creative has more than 99% of its revenue coming from the sales of Bitcoin mining machines and related parts, so the fluctuation of Bitcoin prices has a direct impact on its operating performance. Last year, Bitcoin plummeted by more than 70%. Also last year, Canaan Creative's rivals, the other two major mining machine manufacturers Bitmain and Ebang International, also failed in their plans to go public in Hong Kong.

In the prospectus submitted on October 28 this year, Canaan Creative stated that it hopes to support research in artificial intelligence and blockchain, as well as repay debts through financing.

The prospectus shows that Canaan's profits fell sharply last year, and its revenue fell sharply in the first half of this year, turning from profit to loss. It was not until the third quarter that revenue resumed growth and returned to profitability. Net revenue in 2018 was 2.7053 billion yuan (about 394 million US dollars), an increase of 106.8% over 2017, but profits decreased significantly over the past year. Net profit in 2018 was 122.4 million yuan, a sharp drop of 67.4% over 2017. In the first half of this year, Canaan's net revenue was 288.8 million yuan (about 42.1 million US dollars), a year-on-year decrease of 85.2%. The net loss in the quarter was 330.9 million yuan (about 48.2 million US dollars), compared with a profit of 216.8 million yuan in the same period last year. Net revenue in the third quarter was 670.6 million yuan (about 93.8 million US dollars), and profit was 94.6 million yuan (about 13.23 million US dollars).

Canaan Creative warned in its prospectus that after the sharp drop in Bitcoin prices last year and in the first quarter of this year, although the price of the currency has recovered to a certain extent since the second quarter, this has directly affected the market demand for and prices of Bitcoin mining machines.

“Although operations are expected to improve as bitcoin prices recover, operating results generally lag behind bitcoin price increases. In addition, bitcoin price fluctuations will directly affect the trading price of (Canaan Technology) ADS.”

It is worth mentioning that after Canaan Creative switched to the US market, Bitmain, the world’s largest Bitcoin mining machine manufacturer, was also reported to be seeking a listing in the United States.

At the end of October this year, Bitmain secretly submitted an application for listing to the US Securities and Exchange Commission (SEC), with Deutsche Bank as the sponsor. In order to increase the chances of success of this listing, Bitmain even hired Zheng Hua, the former chief representative of Nasdaq in China, as a company consultant to provide advice and suggestions.

It can be foreseen that as the first Bitcoin mining machine stock, Canaan Creative's performance will become a touchstone for U.S. stock investors' attitude towards Bitmain, and will also reflect how the capital market views the transformation of Bitcoin and other cryptocurrency mining machine companies' focus to blockchain.