Canaan Inc. Enters into Securities Purchase Agreement for Series A-1 Preferred Shares Financing and Completes First Tranche Closing

Rhea-AI Summary

Canaan Inc. (NASDAQ: CAN) has secured a Series A-1 Preferred Shares financing agreement worth up to US$200 million with an institutional investor. The first tranche of US$100 million was completed on March 10, 2025, with the remaining amount expected in the near term.

The proceeds will fund the company's growth initiatives, including R&D, production expansion, digital mining operations in North America, and global sales. In their Q4 2024 update, Canaan reported revenue exceeding guidance with a narrowed gross loss. The company maintains its expansion target of 10 EH/s self-mining capacity in North America by mid-2025.

Management views this financing as a strategic alternative to their existing ATM program, which they've maintained at an average selling price above US$2, believing their stock is currently undervalued. The company plans to share more financial details in their upcoming quarterly earnings call.

Positive

• Secured significant financing of US$200 million through Series A-1 Preferred Shares
• Q4 2024 revenue exceeded guidance with narrowed gross loss
• First tranche of US$100 million already received
• Strong product demand reported
• Maintaining disciplined ATM fundraising above US$2

Negative

• Company still experiencing gross losses in Q4 2024
• Stock price considered 'deeply undervalued' by management
• Second tranche of US$100 million subject to conditions
• Exposed to Bitcoin price fluctuations

Insights

Financial Analyst

Canaan's $200 million preferred shares financing represents a significant capital infusion relative to the company's $443 million market cap - effectively a 45% boost to their available capital. The immediate receipt of the first $100 million tranche provides important operational liquidity while the company anticipates closing the second tranche shortly.

This financing comes at a critical juncture for Canaan, as the company faces ongoing financial challenges evidenced by the CEO's reference to a "narrowed gross loss" in Q4 2024. While improvement in loss metrics is positive, it confirms the company remains unprofitable despite revenue exceeding guidance. The financing structure using preferred shares rather than common stock is notable, as it likely indicates the company sought to avoid dilution at current price levels ($1.27), which the CEO explicitly characterizes as "deeply undervalued."

For a crypto mining equipment manufacturer and operator, capital access is paramount given the significant R&D and infrastructure investments required to remain competitive. The financing provides Canaan the resources to pursue its ambitious 10 EH/s self-mining capacity target in North America by mid-2025, potentially transforming its revenue composition with greater recurring mining income to complement equipment sales. This balanced approach could reduce cyclicality in a sector known for extreme volatility.

The transaction reflects strategic financial management - securing substantial funding while preserving the ATM program for potentially more favorable market conditions above $2.00 per share. However, investors should note the significant gap between current price ($1.27) and management's $2.00+ valuation target, suggesting continued confidence challenges in the market.

Cryptocurrency Specialist

This financing marks a pivotal development for Canaan beyond mere capital acquisition. The $200 million injection strategically positions Canaan to capitalize on the current mining landscape through dual-vector expansion of both hardware manufacturing and self-mining operations.

The company's commitment to reaching 10 EH/s self-mining capacity represents a substantial operational transformation. For context, this target would place Canaan among the larger public Bitcoin mining entities, diversifying revenue streams away from pure equipment sales which are historically subject to extreme cyclicality tied to Bitcoin price movements.

Particularly significant is Canaan's North American expansion focus. This geographic pivot represents a calculated response to the ongoing regulatory challenges in traditional mining markets and positions the company to access more stable operational environments and potentially lower-cost energy in certain North American regions. The financing provides essential capital for both facility development and equipment deployment in these markets.

The investor's willingness to commit substantial capital despite "recent Bitcoin price fluctuations" suggests confidence in Canaan's fundamental business model beyond short-term crypto market volatility. This vote of confidence is noteworthy given the mining sector's history of boom-bust financing cycles.

Canaan's emphasis on strengthening its wafer supply chain indicates recognition of a critical vulnerability in mining hardware manufacturing. Securing reliable chip access through strategic partnerships or investments could provide significant competitive advantages in an industry where production constraints often limit ability to capitalize on demand surges during bull markets.

Provides Company with access to up to US$200 million

SINGAPORE, March 10, 2025 /PRNewswire/ -- Canaan Inc. (NASDAQ: CAN) ("Canaan" or the "Company"), an innovator in crypto mining, today announced that the Company had entered into a Securities Purchase Agreement (the "Agreement") with an institutional investor (the "Buyer"), providing the Company with total gross proceeds of up to US$200 million through a Series A-1 Preferred Shares financing (the "Preferred Shares Financing"). First tranche closing under the Preferred Shares Financing was completed on March 10, 2025, where an initial US$100 million has been received. An additional US$100 million is expected to be received in the near term in connection with the closing of the second tranche, subject to certain terms and conditions. We remind investors to review our recent public filings related to the Preferred Shares Financing.

The net proceeds from the financing will be used to fund activities necessary to support the Company's growth, including research and development, expansion of production scale, manufacturing or investing in digital mining sites and equipment for deployment in North America and sales globally, including any acquisition or disposition of assets from or between the Company's subsidiaries, and other general corporate purposes.

"We are grateful for the ongoing support of our long-term investor, whose latest investment reflects its confidence in Canaan's strategy and in the future of Bitcoin," said Nangeng Zhang, chairman and chief executive officer of Canaan. "In our February Bitcoin mining and operational update, released on March 3, we announced our preliminary unaudited financial results for the fourth quarter ended December 31, 2024, reporting expected revenue that exceeded our guidance and an anticipated narrowed gross loss. Despite recent Bitcoin price fluctuations, we remain confident in our outlook and reaffirm our revenue guidance and expansion target of 10 EH/s self-mining capacity in North America by mid-2025. Our confidence is driven by sustained high demand for our products and our strong foundation in R&D, supply chain management, and financial compliance as a public company. We believe that this investment will enable us to accelerate R&D, strengthen our wafer supply chain, and seize additional mining opportunities. 

"Because we believe our stock price is deeply undervalued, we have maintained discipline in our at-the-market (the "ATM") fundraising, with an average selling price above US$2."  Zhang continued, "At current stock price levels,  we view the US$200 million transaction as a strategic alternative that complements our existing ATM program. We will share more details regarding our financials in our upcoming quarterly earnings call."

The Agreement contains customary representations, warranties and agreements by the Company and the Buyer, and indemnification obligations of the Company against certain liabilities, including for liabilities under the Securities Act of 1933, as amended. The provisions of the Agreement, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to such agreement and are not intended as a document for investors and the public to obtain factual information about the current state of affairs of the Company. Rather, investors and the public should look to other disclosures contained in the Company's filings with the SEC.

The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Company's current report on Form 6-K dated March 10, 2025, announcing the execution of the Agreement and the closing of the first tranche financing under the Agreement.

This press release is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy any securities, which is made only by means of a prospectus supplement and related prospectus. There will be no sale of these securities in any jurisdiction in which such an offer, solicitation of an offer to buy or sale would be unlawful.

About Canaan Inc.

Established in 2013, Canaan Inc. (NASDAQ: CAN), is a technology company focusing on ASIC high-performance computing chip design, chip research and development, computing equipment production, and software services. Canaan has extensive experience in chip design and streamlined production in the ASIC field. In 2013, Canaan's founding team shipped to its customers the world's first batch of mining machines incorporating ASIC technology in bitcoin's history under the brand name Avalon. In 2019, Canaan completed its initial public offering on the Nasdaq Global Market. To learn more about Canaan, please visit https://www.canaan.io/.

Safe Harbor Statement

This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, Canaan Inc.'s anticipated financing plans and its intended use of proceeds contain forward-looking statements. Canaan Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission ("SEC") on Forms 20-F and 6-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Canaan Inc.'s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's goals and strategies; the Company's future business development, financial condition and results of operations; the expected growth of the bitcoin industry and the price of bitcoin; the Company's expectations regarding demand for and market acceptance of its products, especially its bitcoin mining machines; the Company's expectations regarding maintaining and strengthening its relationships with production partners and customers; the Company's investment plans and strategies, fluctuations in the Company's quarterly operating results; competition in its industry; and relevant government policies and regulations relating to the Company and cryptocurrency. Further information regarding these and other risks is included in the Company's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Canaan Inc. does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

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Investor Relations Contact

Canaan Inc.
Xi Zhang
Email: IR@canaan-creative.com

ICR, LLC.
Robin Yang
Tel: +1 (347) 396-3281
Email: canaan.ir@icrinc.com

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SOURCE Canaan Inc.

FAQ

What is the total value of Canaan's (CAN) new Series A-1 Preferred Shares financing agreement?

The total financing agreement is worth up to US$200 million, with US$100 million already received in the first tranche on March 10, 2025.

How will Canaan (CAN) use the proceeds from the US$200 million financing?

The proceeds will fund R&D, production expansion, digital mining operations in North America, global sales, and general corporate purposes.

What is Canaan's (CAN) self-mining capacity target for North America by mid-2025?

Canaan aims to achieve 10 EH/s self-mining capacity in North America by mid-2025.

How has Canaan (CAN) performed in Q4 2024 according to preliminary results?

Canaan reported revenue exceeding guidance and an anticipated narrowed gross loss for Q4 2024.

What is the average selling price of Canaan's (CAN) ATM fundraising program?

Canaan has maintained an average selling price above US$2 in their ATM fundraising program.