A report by Marcus Aurelius Value, an analysis organization, argues that the Nasdaq-listed ASIC manufacturer Canaan (NASDAQ: CAN) misrepresented its potential revenue for 2020. At least one of its clients is an alleged related party who is unable to honor the $150 million purchase contract.
Aurelius Value also considers Canaan’s AvalonMiner series to be uncompetitive within the ASIC market, noting that the manufacturer’s R&D budget is vastly inferior to competitors like Bitmain.
Following the Feb. 20 report, the analysts have deemed the company’s stock to be uninvestable and revealed that they have entered into short positions.
Canaan representatives responded to some of the claims after multiple Cointelegraph inquiries. Aurelius Value, in turn, did not respond to Cointelegraph’s inquiries on methodology — but we nonetheless found that some of the analysts’ conclusions are not entirely correct.
Alleged client irregularities
The analysts’ core argument against Canaan lies in what it claims to be a highly irregular transaction pertaining to its Nov. 27 initial public offering.
One month before the IPO, a “strategic partnership” was struck with Hong Kong Exchange-listed company Grandshores (HK 1647), which would have the company purchase up to $150 million worth of equipment.
This transaction presents several irregularities, according to Aurelius Value. That one order would represent almost the entirety of Canaan’s revenue in the past twelve months, which amounted to $177 million. Furthermore, they argue that Grandshores has no way of honoring the agreement, citing its $50 million market cap and $16 million cash balance.
Most notably, Grandshores appears to be a related party to Canaan. Hong Kong Stock Exchange filings list Yao Yongjie as its chairman, while Canaan’s Securities and Exchange Commission filings disclose that Yao Yongjie is a partner at a company that owns 9.7% of Canaan shares. A Reuters profile further mentions Yongjie as an angel investor in Canaan. Read More...