Canaan Considers More Bitcoin Sales to Fund Buybacks as Mining Revenue Crashes 96%

Bitcoin mining hardware manufacturer Canaan (CAN) is increasingly relying on its cryptocurrency reserves to support share repurchases as revenue from its mining equipment business suffers a steep decline.

The company announced a new $20 million stock buyback initiative on Tuesday, operating under a broader $100 million repurchase authorization approved by its board on November 6. Management indicated that it plans to increase buyback activity whenever sufficient funds are available.

Canaan’s stock has faced considerable pressure this year, falling approximately 75% through Wednesday’s closing session.

The company’s mining hardware segment generated only $4.8 million in revenue during the third quarter, representing a 96% decline from the $118.6 million recorded during the same period last year. Canaan attributed the downturn to weaker customer demand and declining equipment prices. By comparison, revenue from its proprietary Bitcoin mining operations reached $9.5 million, almost twice the amount generated by hardware sales.

CEO Nangeng Zhang said the company remains committed to maintaining a long-term digital asset treasury while selectively selling cryptocurrency holdings to finance share buybacks.

Previous company disclosures provide further insight into this approach.

In an October update, Canaan revealed that it had disposed of 3,952 ETH and 54.5 BTC, generating approximately $13.9 million. Of those proceeds, $5.4 million was allocated to repurchasing 13.6 million American depositary shares (ADSs), which represent the company’s Nasdaq-listed shares, during late August.

However, the latest buyback initiative comes as a substantial portion of Canaan’s remaining cryptocurrency reserves is already committed to other financial arrangements.

As of September 30, the company held approximately 1,875.5 BTC. Of that total, 1,258 BTC had been pledged as collateral for loans, while another 100 BTC was placed in a fixed-term financial product.

The remaining 517.5 BTC was classified as directly held cryptocurrency assets and carried a value of approximately $43.7 million at the end of September.

Canaan also reported $72.8 million in cash and restricted cash. However, $50 million of that amount was reserved to support a letter of credit associated with infrastructure commitments, leaving approximately $22.8 million in unrestricted funds.

Despite recording an operating loss of $42.9 million during the quarter, Canaan posted a net profit of $8 million. Gains from cryptocurrency and financial derivative revaluations helped offset its operating losses, supported by Bitcoin’s higher valuation at the end of the reporting period.

Company executives believe Canaan’s shares are trading below the underlying value of its business and future growth opportunities. The $100 million buyback authorization remains valid for 12 months, allowing management to adjust repurchase activity based on available funding and operational requirements.