Nasdaq-listed Bitcoin mining equipment maker, Canaan (CAN) had its IPO in November last year. At that time, it was trading at $8.9 and since then, it lost about 64% of its value and is currently down at $3.20.
From March 16, $CAN has been trading below $3 going to its lowest at $2.81 on March 17, a few days after the Bitcoin price crashed. In comparison, during this time, bitcoin has been down only 7.7%, currently trading around $6,900.
“Pick-and-shovel play not really going as planned. CAN has been a disaster since IPO,” said analyst with pseudonym Ceteris Paribus.
Loss in 4Q19 but more incoming in 2020
On Thursday, the China-based company also released its unaudited earnings report. Canaan sold a total of 10.5 EH/s computing power, contributing 20% to the Bitcoin network’s computing power last year. The firm reported a net loss of $114.7 million in Q4 of 2019 and $148 million for 2019. This has been half of the company's revenue generated in 2018.
In an earnings call on Thursday, Nangeng Zhang, founder and CEO of Canaan said the firm recorded an uptick in sales in October and November but a “considerable drop” in December. The report states,
“As a result of the impact of the COVID-19 outbreak, a widespread health crisis that adversely affected general commercial activities, the economies, financial markets, as well as the cryptocurrency market activities, we have lowered our expectations for business in the year of 2020.”
“For the first quarter of 2020, the Company expects total revenues not less than RMB60 million [$8.5 million].”
The report also mentioned the increasing ratio of the “cost of revenues” — that includes the cost of raw material, production, logistics, investories, and write-downs of prepayments — for the sale of its bitcoin mining equipment over the past years, which contributed to dropping profitability.
The cost of revenues could also be increased due to the jump in the price of chip technology, such as Avalon’s latest chip costs over 25% more than its previous version and over 110% more than the previous one.
Amidst these losses, Canaan is also hit with a lawsuit by an investor who accused the company of making misleading information and violating US securities laws. The class-action lawsuit has a deadline of May 4, 2020.