Abstract : Before ringing the bell, Zhang Nanxuan , CEO of Canaan Technology said that New York is a place where countless miracles have been born and witnessed. It is hoped that Canaan's listing will become one of the magical events that was witnessed by New York.
On November 21st at 9:30 am EST, Canaan Technology officially landed on Nasdaq, officially opening a new capital market journey with the code "CAN". The issue price was 9 US dollars, and the raised funds were 90 million US dollars. After more than an hour of inquiry, Canaan Technology opened at $12.6 and then fell below the issue price of $9. As of 11:22 EST, Canaan Technology reported the lowest at $8.50.
The successful listing of Canaan Technology means that it became the first global blockchain to officially complete the IPO to the US. As early as the evening of November 20th, Qianjiang New City in Hangzhou specially arranged a grand reality lighting show to congratulate their local enterprises for the IPO in US.
Rush out of the old hedge: mining
In 2012, Canaan Technology founder Zhang Nangeng and his friends successfully developed the world's first ASIC mining machine - Avalon. With the absolute advantage in performance, the Avalon mine mechanism dominates the bitcoin mining industry. In the market where supply and demand are unbalanced, the Avalon mining machine has been fired at a maximum of RMB 250,000.
In the past six years, as a prophet of this industry, Canaan Technology has witnessed the turmoil in the cryptocurrency industry. With the reshuffle of the industry, Canaan Technology has become a "mine mining enterprise" that everyone can stand up to.
The company's revenue increased from 47.7 million yuan in 2015 to 1.308 billion yuan in 2017, with a compound annual growth rate of 423.7%; net profit also increased from 1.5 million yuan in 2015 to 360 million yuan in 2017, with a compound annual growth rate of 1445.4%.
From 2017 to 2018, Canaan Technology's total revenue increased from 1.308 billion yuan to 2.705 billion yuan, of which more than 99% of revenue comes from bitcoin mining machines and related sales. According to third-party agency Frost & Sullivan, as of the first half of 2019, Canaan Technology is the world's second largest designer and manufacturer of bitcoin mining machines, with a market share of 21.9% globally.
By selling the mining machine and a steady flow of cash, Canaan has made a decent profit. Compared with the new economic companies that are generally tight on cash flow, Canaan Technology can be regarded as a "good boy" in the eyes of capital. But this "good boy" is like "Nezha, who is being quilted in the circle of Qiankun" and has been difficult to be accepted.
In 2016, Lu Yitong (300423.SZ) planned to purchase Hangzhou Canaan Technology at a price of 3.06 billion yuan, with a premium of nearly 14 times. To this end, Lu Yitong suspends trading for half a year, and finally terminates the transaction on the grounds of changes in market environment and regulatory policies after multiple rounds of inquiries from the regulatory authorities.
The regulatory management believes that the transaction is a cross-border merger and acquisition. The establishment of the target is short and the valuation premium is high. After the acquisition, the listed company has a good reputation and the subsequent business risks are high. Besides, it is required to combine the development of the bitcoin industry to explain the rationality that the performance commitment is much higher than the actual performance.
After the failure of the backdoor A shares, Canaan Technology submitted the application for the listing of the New Third Board in August 2017. During this period, three rounds of inquiries were conducted before and after the stock market to test the unknown risks of the bitcoin mining industry. In the end, Canaan Technology chose to give up. In 2018, with the flag of "AI chip", Canaan Technology switched to the IPO of the Hong Kong Stock Exchange, and ended up with missing the deadline.
On the way to the IPO, Canaan Technology has encountered a lot of obstacles, which may be their fate. In an environment where the industry's prospects are unknown, it is not easy to try to open the window of listing.
According to the prospectus, although Canaan Technology achieved a receivable growth of RMB 1.4 billion between 2017 and 2018, the net profit for the same period fell from 376 million yuan to 122 million yuan, a decrease of 67.4%. In the first half of 2019, its total revenue fell to 289 million yuan, with a loss of 330 million yuan. In the same period of 2018, its total revenue and net profit were 1.947 billion yuan and 217 million yuan respectively.
Canaan Technology's mining business is suffering from the direct impact of volatility in the cryptocurrency industry. Facing the future, Canaan Technology has finished the glorious story of the past. Facing a new market, they are trying to walk in a new way. They need to let capital see the possibility of a new business strategy based on the sale of mining machines.
Bring new ideas: edge computing
In the prospectus, Canaan Technology has positioned itself as a "semiconductor company" and "leading supercomputing solution provider" focusing on AI chip development and production, and said that the company's future growth strategy will focus on six major areas: strengthening leading in supercomputing solutions, continuing to invest in high power efficiency IC design, launching new AI products, enhancing the AI platform business model (planning to create an AI SaaS platform), strengthening supply chain management, and continuing to expand oversea business.
The story that Canaan Technology tells to the future can be summarized into two words: “edge computing” and “AI service”.
This sentence is not difficult to understand. Looking back on the past six years, Canaan Technology's external output has always been ASIC graphics card mining machine, and they have a certain accumulation in the field of professional chip design. The ASIC graphics card is a special chip, which is a general term for a chip that is customized for a specific need, such as dedicated audio, video processors, or bitcoin mining. At the same time, many dedicated AI chips can be regarded as one type of ASIC.
Canaan Technology said that the company's AI business is currently small, and plans to balance the mining business and AI chip business in the future to achieve a 1:1 balance. In 2019, the company's AI business revenue is expected to reach tens of millions of yuan. Canaan Technology currently focuses on edge computing and explores applications in the areas of smart retail and autonomous driving.
When talking about new business, Canaan Technology used two more concealed words --- “current” and “exploration”. In fact, their real layout lies in the "AI service." The most direct manifestation is the AI SaaS (AI as a Service) platform they plan to create, which will implement an overall AI service that includes hardware, algorithms and software. At the same time, the platform has tailored to the needs of different IoT scenarios, and created a complete and open ecosystem for end customers.
Canaan Technology said that this will be a source of stable income streams in the future. At present, Canaan Technology is developing the second generation 28nm AI chip Kendryte K510. Compared with the previous generation of products, the Kendryte
K510 is developed for 5G scenes, and greatly enhances computing power and energy efficiency, and will be used for exploration of new scenes such as smart retail and smart driving. Mass production of the second generation chips is expected to begin in the first quarter of 2020. In addition, the company plans to launch third-generation 12nm AI chips in the second half of 2020, which is expected to be applicable to edge and cloud computing.
On December 8, 2019, 2019 CHAINSIGHTS Financial Technology and Blockchain China Summit will be held at the Beijing Daxing Starlight Vision Center. Jean Tirole， Nobel laureate for economics in 2014，BSV leader Craig S. Wright, former McKinsey senior partner Peter B. Walker and many other international guests will attend. At that time, Kong Jianping, the co-chairman of Canaan Technology, will also attend the conference and share the story of Canaan. For more information about the conference, you can refer to the official website.