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Bitcoin Mining Rig Maker Canaan Secures $50 Million In Preferred Shares Sale

Canaan Inc, a prominent manufacturer of Bitcoin (BTC) mining rigs, has successfully secured $50 million through a recent funding round by selling preferred shares. The company made this announcement in a recent submission to the Securities and Exchange Commission (SEC), outlining its intention to utilize the raised funds for the expansion of its research, innovation, and production capabilities.

The $50 million infusion of capital was contributed by an undisclosed institutional investor, with Canaan issuing 50,000 series A Canaan shares, each priced at $1,000 and featuring convertible preference.

According to the SEC filing, “Pursuant to the second tranche of the Preferred Shares Financing, the Company issued 50,000 Preferred Shares at the price of US$1,000.00 per Preferred Share and caused The Bank of New York Mellon to deliver 2,800,000 American depositary shares (“ADSs”), each representing fifteen Class A ordinary shares of the Company, at the price of US$0.00000075 for each ADS.”

Canaan Inc clarified in its filing that the newly acquired funds will primarily be channeled towards enhancing its production capacity, with a particular emphasis on innovation, research, and various other corporate objectives.

This funding round follows a prior round in which the company successfully raised $25 million to support its ongoing business operations. Notably, at the time of the disclosure, Canaan Inc’s share price experienced a 7% increase, although it had encountered a 31% decrease earlier in the month.

Canaan to Improve Bitcoin Mining Capacity Before the Halving

With the surge in mining activity towards the end of the previous year, miners enjoyed increased profits, erasing the losses from the previous year due to the uptick in revenue.

Canaan Inc aims to capitalize on the mining industry’s rush to bolster their capacities. This drive is primarily motivated by the impending Bitcoin halving event, which will reduce miner rewards.

Historically, Bitcoin halvings have been associated with bullish market trends. While mining rewards decrease, miners with expanded capacities tend to generate higher profits from the increasing Bitcoin price, leading to numerous miners announcing expansion plans in the fourth quarter of 2023.

During the second quarter of 2023, Canaan Inc witnessed a 44% growth in miner sales compared to the first quarter, resulting in revenues of $79.3 million. This robust year-on-year growth was seen as a significant improvement, as noted by Canaan’s Chief Financial Officer, James Jin Cheng. He commented, “Our mining revenue reached a new historic high in the second quarter of 2023. Recently, we have ventured into new mining projects in Africa and South America.”

In the third quarter, the company sold hardware with a capacity of 3.8 million Th/s per second, a decrease from its second-quarter performance. However, Canaan Inc announced the launch of the A14 series with enhanced computing power and also secured a Type 2 license for cryptocurrency mining in Kazakhstan in response to new industry regulations.

In the current year, Canaan has revealed follow-on purchase orders for 17,000 BTC mining machines, indicating strong business relationships with Stronghold Digital Mining and Cypher Mining Inc.

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