Bitcoin mining equipment manufacturer Canaan (CAN) is turning to its digital asset reserves to finance stock repurchases as its mining hardware business struggles with a dramatic revenue decline.
The company introduced a $20 million share buyback program on Tuesday, backed by a larger $100 million authorization approved by its board on November 6. Management plans to step up repurchases when sufficient capital becomes available.
Canaan’s stock has suffered a significant decline this year, losing approximately 75% of its value through Wednesday’s market close.
The company’s mining equipment division generated just $4.8 million in third-quarter revenue, marking a 96% drop from the $118.6 million reported during the same quarter last year. Canaan attributed the sharp contraction to reduced customer demand and lower selling prices.
Meanwhile, revenue from its self-operated Bitcoin mining business reached $9.5 million, nearly twice the amount generated by hardware sales.
CEO Nangeng Zhang said Canaan intends to preserve its long-term digital asset treasury strategy while selectively selling cryptocurrency holdings to finance share repurchases.
Canaan Uses Crypto Reserves to Support Buybacks
Canaan’s earlier disclosures show how it has been using cryptocurrency sales to fund its stock repurchase activities.
In an October update, the company reported selling 3,952 ETH and 54.5 BTC for approximately $13.9 million. It subsequently used $5.4 million of those proceeds to repurchase 13.6 million American depositary shares (ADSs), which represent its Nasdaq-listed equity, in late August.
However, the latest buyback announcement comes as a significant portion of Canaan’s remaining Bitcoin reserves is already committed to other financial arrangements.
As of September 30, Canaan held approximately 1,875.5 BTC. Of that amount, 1,258 BTC had been pledged as collateral for loans, while another 100 BTC was allocated to a fixed-term financial product.
This left 517.5 BTC classified as directly held cryptocurrency assets, valued at approximately $43.7 million at the end of September.
The company’s cash position also includes substantial restrictions. Canaan reported $72.8 million in cash and restricted cash, with $50 million committed to backing a letter of credit for its infrastructure obligations. Consequently, approximately $22.8 million remained outside the restricted balance.
Cryptocurrency Gains Help Offset Operating Losses
Despite recording a $42.9 million operating loss during the third quarter, Canaan reported a net profit of $8 million.
The positive result was supported by gains from the revaluation of its cryptocurrency holdings and financial derivatives, reflecting Bitcoin’s higher price at the end of the reporting period.
Management believes the market is undervaluing Canaan’s business and its longer-term growth potential.
The company’s $100 million repurchase authorization will remain active for 12 months, giving management flexibility to purchase additional shares depending on its financial position, available funding, and operational requirements.
