Exclusive: Canaan updates its prospectus to raise US$100 million, lead underwriter Credit Suisse withdraws

On November 13, Wu Blockchain exclusively learned that Canaan, the first mining machine company, will be listed on the Nasdaq on November 21.

At 6:00 a.m. on November 14th, Beijing time, Canaan updated its prospectus again, confirming that it would issue 10 million ADSs, priced at $9-11 per share, and raise between $90 million and $110 million, which was lower than the initial outside belief of $200 million or $400 million. At the same time, the prospectus showed that Credit Suisse, the top-ranked lead underwriter, had withdrawn from the ranks of underwriters. This was the last update of the prospectus before the listing on the 21st.

Canaan's fundraising amount is higher than 36kr, which was recently listed on the US stock market, and slightly lower than NetEase Youdao. The market capitalizations of 36kr and NetEase Youdao are approximately US$500 million and US$1.5 billion respectively, and it is expected that Canaan's market capitalization will be between the two. Regarding the fundraising amount, Canaan initially filled in US$400 million, but the ADS calculation updated in this prospectus shows that the fundraising amount is between US$90 million and US$110 million.

Canaan's prospectus initially showed that underwriters included Credit Suisse, Citi, China Renaissance, CMB International, Galaxy Digital Advisors LLC, Huatai Securities and Tiger Brokers International. Galaxy Digital Advisors LLC is a broker-dealer under the crypto asset investment bank Galaxy Digital.

Among them, Credit Suisse ranked first, and Citigroup ranked first and second, and they are the two main underwriters.

On the 12th, people close to Canaan revealed to Wu Blockchain that due to various reasons, Credit Suisse is suspected to have withdrawn from the ranks of lead underwriters.

In this regard, the relevant person in charge of Canaan told Wu Blockchain that they would not comment. The author asked Canaan Chairman Kong Jianping for confirmation, but he did not respond.

The updated prospectus shows that Credit Suisse has indeed withdrawn from the list of lead underwriters and Haitong International Securities has been added. There were rumors that Citigroup was also hesitating. However, the updated prospectus shows that Citigroup did not withdraw after Credit Suisse withdrew and will take up the banner of lead underwriter.

Screenshot of the original underwriter

Screenshot of current underwriters

According to lawyer Raymond Wang , the lead underwriter is the general coordinator of the entire IPO project, responsible for coordinating all parties involved in the project, including the company, accounting firms, law firms, appraisers, public relations companies and other institutions, and managing their respective progress in the project. In addition, the lead underwriter must supervise the drafting and submission of various IPO documents, maintain real-time communication with the exchange, provide listing guidance at any time according to the needs of the company, organize road shows, and bear the bulk of stock sales. The profit model of the underwriter is to earn a certain percentage of commissions from the money raised by the listed company.

Generally speaking, why do lead underwriters withdraw? The information I have obtained is that it may be because fundraising is not very smooth and the corresponding returns cannot be obtained. The information obtained by Blockchain Rhythm from investment bankers is "cyclical reasons". There are many different opinions on the specific reasons.

As the first listed company in China's mining machine industry, Canaan has gone through hardships, including backdoor listing on A-shares, the New Third Board, and the Hong Kong stock market, but has failed many times before finally being successfully listed in the United States. Previously, the Politburo of the Communist Party of China collectively studied blockchain technology, and Canaan is a star enterprise in Zhejiang Province and has been strongly supported by the local government. There are many favorable factors in the capital market.

However, since the release of the prospectus, Canaan has also been subject to negative comments due to its performance decline compared to the previous year. Canaan's prospectus shows that in the first three quarters of this year, Canaan's total revenue was about 960 million yuan, a decrease of 60.5% compared to the total revenue of 2.43 billion yuan in the first three quarters of 2018; net profit was about -240 million yuan, a decrease of nearly -260% compared to the net profit of 150 million yuan in the first three quarters of 2018.

However, Canaan's performance improved in the third quarter. On November 6, Canaan updated its prospectus, showing that the company achieved a net profit of RMB 94 million, or about US$13 million, in the third quarter of 2019, with revenue of RMB 670 million (US$95 million), a year-on-year increase of 40%. A miner told Wu Blockchain that Canaan's recent delivery speed has significantly accelerated, and it seems to be impacting the performance in the third and fourth quarters. In contrast, Shenma's products have been delayed significantly.