Canaan Weighs Selling More BTC to Support Stock Repurchases After Mining Revenue Slump

Canaan (CAN), a Bitcoin mining equipment manufacturer, is increasingly using its cryptocurrency reserves to finance stock repurchases as revenue from its hardware division continues to collapse.

The company rolled out a $20 million share buyback program on Tuesday, operating under a larger $100 million repurchase authorization approved by its board on November 6. Management expects to expand its purchases when sufficient financial resources become available.

Canaan’s shares have declined roughly 75% this year through Wednesday’s closing session, highlighting the pressure facing the company.

Its mining hardware business generated only $4.8 million in revenue during the third quarter, down 96% from $118.6 million a year earlier. The company attributed the decline to weaker market demand and reduced selling prices.

Meanwhile, Canaan’s self-operated Bitcoin mining business produced $9.5 million in revenue, nearly twice the amount contributed by equipment sales.

CEO Nangeng Zhang said the company remains committed to its long-term digital asset treasury strategy but will selectively sell cryptocurrency holdings to generate funding for share repurchases.

Canaan Relies on Crypto Sales to Finance Buybacks

The company’s earlier disclosures show that cryptocurrency liquidations have already played a role in funding its stock repurchase activities.

In an October update, Canaan reported selling 3,952 ETH and 54.5 BTC for approximately $13.9 million. From those proceeds, it allocated $5.4 million to repurchase 13.6 million American depositary shares (ADSs), which represent its Nasdaq-listed stock, in late August.

However, the latest buyback program comes as a considerable portion of its remaining Bitcoin holdings is already committed elsewhere.

Canaan reported owning 1,875.5 BTC as of September 30. Approximately 1,258 BTC had been pledged against loans, while another 100 BTC was held in a fixed-term financial product.

Consequently, only 517.5 BTC was classified as directly held cryptocurrency assets, carrying a value of approximately $43.7 million at the end of September.

The company’s cash position also faces restrictions. Canaan reported $72.8 million in cash and restricted cash, of which $50 million supported a letter of credit connected to infrastructure commitments. This left approximately $22.8 million outside the restricted balance.

Bitcoin-Related Gains Support Quarterly Profit

Canaan recorded an $8 million net profit for the third quarter despite suffering a $42.9 million operating loss.

Gains from changes in the valuation of cryptocurrency holdings and financial derivatives helped the company move into profitability, reflecting Bitcoin’s stronger price at the end of the reporting period.

Management believes the market is undervaluing Canaan’s operations and its longer-term expansion opportunities.

The company’s $100 million repurchase authorization will remain effective for 12 months. Management can adjust the timing and volume of share purchases depending on its available funding, financial requirements, and operating conditions.