Even as Bitcoin prices rocketed, cryptocurrency mining rig maker Canaan Creative’s losses in the third quarter jumped four fold to RMB 86.4 million, which company management attributed to pandemic and economic headwinds while competition intensified from rivals such as Bitmain and Microbt.

Why it matters: Canaan is one of China’s biggest crypto mining equipment makers, and one of only two listed in the US along with rival Ebang.

  • In Q3, Bitcoin’s price more than doubled to exceed $19,000, nearing a historical high. The surge was a missed opportunity for the embattled crypto mining rig maker.
  • Canaan’s share price in New York dropped 17.5% on Monday.

Details: Canaan’s third quarter losses widened to RMB 86.4 million ($12.7 million) from RMB 16.7 million in the previous quarter, according to a company filing released on Monday. In the same quarter a year ago, Canaan reported net income of RMB 94.6 million.

  • Canaan’s net revenues sank 76% year on year to RMB 163.0 million, a 8% decline from the second quarter.
  • Computing power sold dropped to 2.9 million terahash per second, a 20.7% decrease from the same period last year when the figure stood at 3.7 million terhahash/second, and a 13.4% quarter-on-quarter drop.
  • Revenue divided by computing power sold indicate that Canaan has significantly reduced its equipment prices to boost sales.
  • In the quarter ended Sept. 30, the price was $8.10 per terahash/second, compared with $27.5 per terahash/second in the same quarter a year ago.
  • Canaan has been spending more on short-term investments, which has drained its cash and cash equivalents. It spent RMB 204.6 million in the third quarter compared with RMB 11 million in the same period a year ago. Its cash and cash equivalents fell by almost 66% to RMB 177.4 million in the same time period.
  • The company’s spending on research and development rose to RMB 32.1 million from RMB 26.1 million in Q2. A short report in February accused Canaan of underspending on R & D and creating inferior products.

Context: The short report by Marcus Aurelius Value said that it found “undisclosed related party transactions, irregularities involving many customers and distributors, as well as a business model that we view as broken.”

  • Canaan tried to list three times in Asia before managing to go public on the Nasdaq in 2019.
  • The company’s stock lost 65% of its value between Feb. 20, when the short report was released, and the end of October, when Bitcoin’s price started to surge, and Canaan stock started to rebound. It had managed to halve its losses on a sequential basis in the previous quarter.
  • Canaan’s latest mining rig, the Avalon A1246 Pro, can mine up to 90 terahash/second with a 38 jule/terahash power efficiency. It is losing out to the latest models by other companies including Bitmain’s Antminer S19 Pro which can mine up to 110 terahash/second consuming 29.5 jule/terahash, and Microbt’s Whatsminer M40 which can mine up to 410 terahash/second with a power efficiency of 25 jules/terahash.

Eliza Gkritsi

Eliza was TechNode's blockchain and fintech reporter until July 2021, when she moved to CoinDesk to cover crypto in Asia. Get in touch with her via email or Twitter.