Canaan Creative switched to the Science and Technology Innovation Board, and the new round of financing was all for old shareholders to increase capital

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Compiled by: Krypton 12

According to CoinDesk, sources revealed that Bitcoin mining machine manufacturer Canaan Creative is considering relisting, but this time not on the Hong Kong Stock Exchange, but on the Science and Technology Innovation Board (Science and Technology Innovation Board) of the Shanghai Stock Exchange.

The relevant sources added that Canaan's current listing plan on the Shanghai Stock Exchange is still under discussion and the final conclusion has not yet been established. About a few weeks ago, in order to meet the needs of domestic technology startups, the Shanghai Stock Exchange launched the Science and Technology Innovation Board, which is also called the "Chinese version of Nasdaq" by industry insiders. A few months ago, Canaan first submitted a listing application to the Hong Kong Stock Exchange.

Another source revealed that Canaan Creative has actually had two listing strategies, one is to apply for an IPO in China, and the other is to apply in the United States. They have even communicated with the New York Stock Exchange and Nasdaq. The source revealed that although the relevant plan has not yet been finalized, it is likely to be completed before the end of this year.

As of the time of writing, foreign media have asked Canaan Creative about this matter, but they have not yet made an official comment.

The Shanghai Stock Exchange, which ranked fourth in the world in terms of market capitalization last year, officially launched its new Science and Technology Innovation Board on March 1, 2019, in response to the call of national leaders to help domestic technology startups raise funds more easily.

A new round of financing, but the investors are still the same old faces

It is worth mentioning that Canaan Creative plans to go public again after completing the latest round of financing. Previously, they have raised "hundreds of millions of dollars" and the company's valuation has reached "billions of dollars." However, according to foreign media reports, this round of financing did not attract new investors.

According to a source:

"Canaan Creative did complete a round of financing before, but there were no new investors joining. All the money was actually paid out of their old shareholders' pockets."

The source is close to Canaan Creative, but he declined to be named and said the information was not public.

While an increase in investment by existing shareholders may be seen as a sign of confidence in Canaan, the absence of new investors also means that the venture capital market may not be optimistic about the mining business due to the continued decline in cryptocurrency prices.

The source close to Canaan added:

“Given the overall bearish market conditions right now, it’s really hard to get investment.”

Red chip candidates

It is worth noting that the information about Canaan's multi-billion dollar company valuation was released after the Shanghai Stock Exchange announced the listing rules for the Science and Technology Innovation Board. Moreover, although Canaan's headquarters is located in Hangzhou, its holding company Canaan Inc. is actually registered in the Cayman Islands, which means that they are likely to be classified as a "red chip" company. According to the definition in the "Notice of the General Office of the State Council on Forwarding the Opinions of the China Securities Regulatory Commission on Carrying out Pilot Programs for the Domestic Issuance of Stocks or Depositary Receipts by Innovative Enterprises" (Guobanfa [2018] No. 21), a red chip company refers to an enterprise with its registered place overseas and its main business activities in China.

To be listed on the Science and Technology Innovation Board, the valuation of red-chip company applicants must exceed RMB 10 billion (approximately US$1.5 billion), or be no less than RMB 5 billion (approximately US$750 million), and the revenue in the most recent year must exceed RMB 500 million (approximately US$75 million).

Prior to this recent financing deal, Canaan Creative may not have met the requirements for listing on the Science and Technology Innovation Board.

In May 2017, Canaan completed a $43 million Series A financing, at which time the company was valued at approximately $430 million. In addition, according to the information disclosed in Canaan's prospectus for its initial public offering in Hong Kong, their business revenue in 2017 was $200 million and their net profit was $56 million.

It is worth mentioning that Canaan Creative has been interacting with government securities regulators for a long time. On April 24, 2018, Jiang Yang, vice chairman of the China Securities Regulatory Commission, visited the company's office in Hangzhou. It is reported that during the visit, Jiang Yang told Canaan Creative: "No matter what applications the chips you produce will be used for, you are still a chip company in essence. I hope you can go public in the domestic market."

Canaan Creative published Jiang Yang’s statement on the company on its WeChat official account, but the article was later deleted.

Existing Shareholders

Although the sources did not disclose which shareholders made "contributions" to Canaan Creative's latest round of financing transactions, it can be seen who their major shareholders are from the prospectus submitted by the company when applying for an initial public offering on the Hong Kong Stock Exchange.

According to Canaan Creative's prospectus, the company's major shareholders include chairman and co-founder Zhang Nangeng (holding 17.6%), co-founder and executive director Li Jiaxuan (holding 17.2%), and co-founder and former director Liu Xiangfu (holding 17.61%).

In addition, executive director Kong Jianping and non-executive director Sun Qifeng own 7.8% and 5% of Canaan Creative's shares respectively.

The remaining 34.69% of the company's shares are categorized as "other shareholders", of which the largest shareholder (with a shareholding ratio of 8.78%) is Jiaji Information Technology Limited.

Some foreign media have tried to contact Canaan Creative's publicly identified shareholders, but have so far been unsuccessful.

Original link: https://www.coindesk.com/avalon-bitcoin-miner-maker-canaan-is-plotting-another-ipo-attempt