Canaan starts $20M buyback and will sell crypto to fund it

Buyback and crypto sales

Canaan, which makes Bitcoin mining machines, has begun a $20 million share buyback and will sell crypto assets to pay for it, the company said. The program sits inside a wider $100 million authorization that its board approved on 6 November. The authorization is valid for 12 months.

CEO Nangeng Zhang said the company is keeping a long-term digital asset treasury while it selectively converts crypto assets into cash to fund the buybacks, according to BTCHaber. Management argues the share price does not reflect the value of the business and its growth potential.

Hardware revenue down 96%

Canaan's hardware business brought in $4.8 million in the third quarter, down 96% from $118.6 million in the same period a year earlier. The company attributed the drop to weaker demand and lower selling prices. Revenue from its own mining operations was $9.5 million in the quarter.

The company reported an operating loss of $42.9 million for the quarter but a net profit of $8 million. The profit came from gains on revaluing its crypto holdings and financial derivatives, helped by a higher Bitcoin price at the end of the quarter.

Canaan's shares have lost about 75% of their value this year, which preceded the buyback announcement.

What the balance sheet holds

As of 30 September, Canaan held 1,875.5 BTC. Of that, 1,258 BTC were pledged as collateral against loans and 100 BTC were placed in a forward product. The remaining 517.5 BTC were worth $43.7 million at the end of the quarter.

The company listed $72.8 million in cash and restricted cash, of which $50 million backed a letter of credit supporting infrastructure commitments. That left about $22.8 million in freely available cash.

In October, Canaan said it had sold 3,952 ETH and 54.5 BTC for about $13.9 million. It used $5.4 million of the proceeds to repurchase 13.6 million American depositary shares in late August.