Canaan Inc. (CAN) Accused of Misleading Shareholders
According to public record, in November 2019, Canaan Inc. (CAN) finally completed a NASDAQ IPO at $9.00 per ADS for proceeds of approximately $90 million. Prior to its IPO, in October 2019, Canaan entered into a purported “strategic cooperation” agreement with Hangzhou Grandshores Weicheng Technology Co., Ltd (“Grandshores”) in which Grandshores agreed to purchase up to $150 million worth of equipment from or distribute on behalf of Canaan. The agreement turned out to be a related party transaction, which Canaan failed to disclose in its registration statement. Instead, the Company touted its sales of $132 million in 2019 and $36.2 million in cash on hand in the end of 2018. Then, on February 20, 2020, Marcus Aurelius Value published a report exposing Grandshores as an undisclosed related party transaction that boosted Canaan sales and irregularities involving reported distributors and the likelihood Canaan’s largest Chinese customers would not return. On this news, Canaan ADS’ fell to $5.32 per ADS, representing a 40% decline from its IPO price.