Canaan, Inc. – the Hangzhou-based mega-seller of cryptocurrency mining equipment – has allowed its application for a Hong Kong IPO to lapse. The IPO would have been worth a record $400 million, and the lapse casts doubt on the futures of other bitcoin mining gear providers.
The application “ran out of steam” on Thursday, November 15, 2018 – approximately six months after it was originally filed. Despite bitcoin’s massively slumping price, optimism has rung true throughout the cryptocurrency space as of late, suggesting the IPO likely would have been met with success. Unfortunately, it appears things were not meant to be.
At the same time, however, Canaan’s original prospects for the IPO were slated to be $2 billion, and the sudden drop to $400 million (a drop of more than three-quarters) suggests a lackluster outcome for those involved.
More Info Is Needed
Many regulators ultimately had questions surrounding the IPO’s business model and prospects. In addition, some sources are claiming that the IPO was never set to take place this year based on updates from the Hong Kong stock exchange regarding a listing hearing.
Canaan is now in a position where it can refile its IPO application granted executives update it with the proper financial data. This is the only way for the IPO considerations to continue.
A Few Barricades to Cross
Along with Canaan, two other mining equipment giants – Bitmain Technologies and Ebang – also have IPO applications being considered by the Hong Kong stock exchange. However, Ebang’s listing isn’t likely to go public until 2019 or later. Bitmain, on the other hand, is undergoing a “massive interrogation” by the stock exchange and the Securities and Future Commission (SFC), answering questions and hoping to get an official stamp of approval soon.
Read: What is Bitmain?
The pause in Canaan’s plans is coming just weeks after the SFC claimed it would be reexamining its regulations surrounding virtual currencies. However, it appears specific licensing requirements are now being forced upon financial firms that either manage or intend to manage investor portfolios containing cryptocurrencies, and the SFC is not considering whether these currencies classify as futures or securities.
Stephen Chan – partner at the law firm Dechert LLP – claims that this is mainly due to the volatility and price swings witnessed in virtual assets, and that the SFC is only looking to protect customers.
“Specifically, because of the SFC’s announcement, there will be quite a lot of changes in terms of the outlook of what [crypto miners] can do.”
The prospects of future regulations are weighing heavily on the cryptocurrency space. Canaan, for example, has worked hard to present itself to authorities not so much as a bitcoin company, but rather as a chip designer looking to establish itself in other technological venues such as artificial intelligence (AI) and blockchain. Unfortunately, it doesn’t look like regulators are taking the bait.
Bitcoin’s Not Doing So Hot
At the time of writing, bitcoin is trading for approximately $5,500 – its lowest price in about one year. A widespread slump began last Wednesday, November 14, and has taken a nasty toll on several digital assets thus far.
An anonymous senior equity capital markets banker not directly involved in any of the ongoing IPO applications recently stated that both the Hong Kong stock exchange and the SFC had several concerns regarding the IPO projects at hand.
“With the bitcoin price dropping so much this year, there are a lot of uncertainties over their business. If we cannot forecast their financials, how can we sell their IPOs?”
If bitcoin continues to drop even further, one can probably expect further delays regarding the IPO applications, bitcoin ETF applications, and other major moves to legitimize the digital asset arena.