Founded 6 years ago, with a valuation of 15 billion, mining machine giant Canaan Creative is about to go public in the US

On October 10, the head of a securities company announced that Canaan Creative, a mining machine manufacturer, will be listed in the United States on November 20, and the securities company will provide USDT deposit services for new listings.

The person in charge of the securities company said that the news has not been officially announced and it is not convenient to disclose the source of the news at present.

Regarding this matter, Shenlian Finance sought confirmation from an insider of Canaan Creative. The insider stated that Canaan Creative is indeed about to be listed in the United States, but the specific date is not convenient to disclose. The risks and benefits of participating in the new listing through a certain securities product need to be judged by investors themselves.

1「 Founded 6 years ago, valued at 15 billion」

Canaan Creative was founded in Beijing in April 2013 and was introduced to Hangzhou from Beijing Zhongguancun by the Hangzhou Branch of Tsinghua Yangtze River Delta Research Institute in 2015. Canaan Creative is the world's first organization to successfully develop and mass-produce 7nm chips, and its "Avalon" series of mining machines are well-known in the cryptocurrency market.

According to the prospectus, Canaan Creative's revenue in 2015, 2016 and 2017 was RMB 48 million, RMB 316 million and RMB 1.308 billion respectively, and its gross profit was RMB 14 million, RMB 132 million and RMB 604 million respectively; the gross profit margin was 29.1%, 41.7% and 46.2% respectively, and its after-tax profit was RMB 2 million, RMB 53 million and RMB 361 million respectively.

In 2017, Canaan Creative's global Bitcoin mining machine shipments are expected to total 294,500 units, accounting for 20.9% of the global market share in terms of shipments; and 19.5% of the global market share in terms of computing power, making it the world's second largest cryptocurrency mining machine manufacturer.

In January 2019, Shao Jianliang, head of Canaan Creative's blockchain business unit, revealed at an offline event that Canaan Creative's sales revenue in 2018 exceeded 4 billion yuan.

On March 11, the Securities Times reported that Canaan Creative had just completed a round of financing amounting to hundreds of millions of dollars. After this round of financing, its valuation reached billions of dollars.

Shao Jianliang, head of Canaan Creative's blockchain business unit, revealed to Shenzhen Chain Finance that after completing hundreds of millions of dollars in financing, Canaan Creative has been in talks with many institutions recently and may have new financing in the future. If there is any further development, it will be announced to the market.

Another Canaan insider also revealed that in the latest round of financing, because some investment institutions did not have time to enter, there may be a next round.

Shao Jianliang said that Canaan Creative will continue to make investments in artificial intelligence and blockchain ecology in the future, using chips as an entry point to build a large ecological platform for artificial intelligence and blockchain.

However, regarding this round of financing, Coindesk revealed that there were no new investors entering this round of financing, and all investments were additional investments from old shareholders.

In addition to this round of financing, Canaan Creative's most watched round of financing was in May 2017, when it received nearly RMB 300 million in investment from Jinjiang Group, Bopu Investment, Tunlan Capital and others. The post-investment valuation of this round was nearly RMB 3.3 billion.

According to the "2018 Hurun Greater China Unicorn Index" released by Hurun Research Institute in January 2019, Canaan Creative's valuation is 15 billion yuan.

2. Three attempts to attack the capital market, three failures

The three major mining machine giants have always been eager to enter the traditional capital market, but the road to listing has been full of bumps.

Among them, Canaan Creative's road to listing can be said to be the most difficult. It has attempted to enter the capital market three times and failed three times.

In 2016, Canaan Creative attempted to list on the A-share market through a "reverse shell" approach.

In June 2016, Luyitong Electric, a company listed on the Shenzhen Stock Exchange's Growth Enterprise Market, announced plans for a major asset reorganization, intending to acquire all shares from Canaan Creative's 14 existing shareholders for RMB 3.06 billion. However, the Shenzhen Stock Exchange later halted the plan due to suspicion of "shelling".

In August 2017, Canaan Creative once again sought to be listed on the New Third Board.

However, this was not a good time, because one month later on September 4, the domestic cryptocurrency market encountered a policy regulation storm. Relevant departments began to ban all cryptocurrency transactions and ICOs in the country. Canaan Creative also received four consecutive inquiries from the stock transfer company in October and November of that year, and finally gave up the listing in March of the following year.

In May 2018, Canaan Creative went to Hong Kong for listing, which was also Canaan Creative's third effort.

On May 15, Canaan Creative officially submitted its IPO application to the Hong Kong Stock Exchange, intending to be listed on the main board of Hong Kong in the form of a red chip. Morgan Stanley, Deutsche Securities, Credit Suisse and CMB International will serve as joint sponsors.

However, six months later, the Hong Kong Stock Exchange's official website classified Canaan Creative's listing application as "invalid", and its listing process failed again.

Later, media reported that Canaan Creative secretly submitted an application for listing to the U.S. Securities and Exchange Commission (SEC) to raise US$200 million.

3 "Core executives previously left the management due to differences in ideas"

In addition to the good news of the listing, on October 10, the Hurun Research Institute released the 2019 Hurun Rich List. In the blockchain field, three people from Canaan Creative were on the list. Among them, Liu Xiangfu and Zhang Nangeng have a net worth of 3.9 billion yuan each, and Li Jiaxuan has 3.8 billion yuan.

Regarding Liu Xiangfu, there were previous reports that he had left the management. On February 12, 2019, Coindesk quoted an insider as saying that Liu Xiangfu had left his daily management position and no longer served as a member of the executive board of Canaan Inc., the holding company of Canaan Creative, because Liu Xiangfu had differences with the company's overall strategic development.

Canaan Creative's prospectus shows that Liu Xiangfu holds 17.6103% of the shares of the listed entity and is one of the actual controllers. He and two other founders and shareholders control the company through a unanimous action agreement.

Canaan's management hopes to continue building the company into a manufacturer focused on cryptocurrency mining and artificial intelligence chips. Canaan itself does not mine or operate mining pools, and the leadership hopes to maintain this status in order to better achieve an IPO.

However, Liu Xiangfu, who has a background in computer technology, believes that in the blockchain industry, hardware and software cannot be completely separated. As a company that produces mining machines, it cannot completely separate itself from the mining farm and mining pool business.

Regarding Liu Xiangfu's movements, on February 13, Shenlian Finance verified with an insider of Canaan Creative, who responded: "The facts are basically as the media said. Liu Xiangfu is indeed slowly fading out of the company's management."

Regarding Liu Xiangfu no longer serving as an executive board member and his disagreements with the company's strategic philosophy, the insider did not explicitly deny it, but only said that Canaan Creative is currently seeking an IPO and all news must wait for official announcements.

The previous prospectus showed that in July 2006, Liu Xiangfu obtained a bachelor's degree in computer science and technology from Changchun University. In April 2013, he joined Canaan Creative and in December became a new shareholder following Zhang Nangeng and Li Jiaxuan.

In 2015, after completing a new round of capital injection, Zhang, Li, and Liu held 33.4%, 33.4%, and 33.2% of Canaan Creative's equity respectively. When the prospectus was released in 2018, the three of them, as controlling shareholders, held a total of 52% of the shares, namely: Zhang Nangeng 17.6010%, Li Jiaxuan 17.2006%, and Liu Xiangfu 17.6103%.

Although the road to listing failed three times and there was negative news about the "departure" of senior executives, among the three major mining machine giants, Canaan Creative was the first to successfully embark on the listing train.

Canaan Creative has gone public. Are Bitmain and Ebang International far behind?

Author: Doorman

Source | Deepchain