Bitcoin mining-machine maker Canaan (CAN) is using its cryptocurrency holdings to repurchase its shares as revenue from mining-equipment sales plunges.
On Tuesday, the company launched a $20 million buyback program under a broader $100 million authorization approved by its board on Nov. 6. Management says it plans to step up repurchases as funds become available.
Canaan shares are down about 75% this year through Wednesday’s close, according to data.
The company’s hardware business brought in just $4.8 million in third-quarter revenue, a 96% drop from $118.6 million a year earlier. Canaan attributed the decline to weaker demand and lower selling prices. Its mining operations generated $9.5 million, nearly twice its hardware revenue.
CEO Nangeng Zhang said Canaan was maintaining a long-term digital-asset treasury while “selectively monetizing cryptocurrency holdings to fund share repurchases.”
Previous disclosures illustrate how the approach works.
In an October update, Canaan said it had sold 3,952 ETH and 54.5 $BTC for about $13.9 million. In late August, it used $5.4 million to repurchase 13.6 million American depositary shares, which represent its shares on Nasdaq.
Much of the company’s remaining treasury is tied up as it begins the new program.
As of Sept. 30, Canaan held 1,875.5 $BTC, including 1,258 pledged as loan collateral and 100 held in a fixed-term product. The remaining 517.5 $BTC was recorded as cryptocurrency assets on its balance sheet, valued at $43.7 million at quarter-end.
Of the company’s $72.8 million in cash and restricted cash, $50 million was backing a letter of credit for infrastructure commitments. About $22.8 million remained outside the restricted balance.
Canaan reported a quarterly profit of $8 million despite an operating loss of $42.9 million. Gains from revaluing cryptocurrency and financial derivatives contributed to the profit, reflecting bitcoin’s higher price at quarter-end.
Management says the company’s shares undervalue its business and growth prospects. The buyback authorization runs for 12 months, and Canaan may adjust its purchases based on operating and funding needs.
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