April 15, 2021 - An investor in shares of Canaan Inc. (NASDAQ: CAN) filed a lawsuit in the U.S. District Court for the Southern District of New York over alleged violations of Federal Securities Laws by Canaan Inc. in connection with certain allegedly false and misleading statements made between February 10, 2021 and April 9, 2021.
China based Canaan Inc. engages in the research, design, and sale of integrated circuit (IC) final system products by integrating IC products for bitcoin mining and related components primarily in the People's Republic of China.
On February 9, 2021 Canaan Inc. announced that its former Chief Financial Officer ("CFO"), Quanfu Hong ("Hong"), had resigned effective immediately, providing no explanation as to why and citing only "personal reasons."
The next day, February 10, 2021, Canaan Inc. announced that its "revenue visibility ha[d] improved substantially" and making other positive statements about purported visibility into increases in the size and quality of orders the Company had been receiving. These statements were heralded by the investment community in light of former CFO Hong’s statements on November 30, 2020 that "the demand for mining machines in the market continued to rebound during the third quarter, and" that Canaan had "received a large number of pre-sale orders which [were] scheduled for delivery starting in the fourth quarter of 2020." ("4Q20").
On Monday, April 12, 2021, Canaan Inc. disclosed its actual 4Q20 and FY20 financial results for the period ended December 31, 2020, including a 93% year-over-year decrease in computing power sold and net revenues for the quarter.
According to the complaint the plaintiff alleges on behalf of purchasers of Canaan Inc. (NASDAQ: CAN) common shares between February 10, 2021 and April 9, 2021, that the defendants violated Federal Securities Laws. More specifically, the plaintiff claims that Canaan Inc issued between February 10, 2021 and April 9, 2021 Company’s business metrics and financial prospects that were materially false and misleading in that they concealed that due to ongoing supply chain disruptions and the introduction of the Company’s next-generation A12 series bitcoin mining machines – which had cannibalized sales of the older product offerings – Canaan’s 4Q20 sales had declined more than 93% year-over-year compared to its fourth quarter fiscal year 2019 ("4Q19") sales and more than 93% quarter-over-quarter compared to its third quarter FY20 ("3Q20") sales and that as a result, Canaan’s 4Q20 total net revenues had decreased to RMB38.2 million (US$5.9 million) from RMB463.2 million in 4Q19 and RMB163.0 million in 3Q20.