A stockholder of bitcoin mining hardware maker Canaan is suing the company for violating U.S. securities law.
Filed on March 4 at the United States District Court for the District of Oregon, the lawsuit alleges that the Chinese firm misled investors about the company's financial health and operations status in its initial public offering (IPO) filing to the Securities and Exchange Commission (SEC).
In addition to Canaan, the lawsuit also names the firm's underwriters for this IPO as defendants, including Galaxy Digital, China Renaissance Securities, Huatai Financial Holdings, CMB International Capital, and others. Notably, one of the original lead underwriters Credit Suisse dropped out a few days before the IPO.
The plaintiff, named Phillippe Lemieux, stated that he bought 200 Canaan shares on February 12 at $8.50 apiece, near the all-time high. In the complaint, Lemieux claimed that Canaan misleadingly labeled a $150 million purchase agreement with a related party as "strategic cooperation," while in fact, the chairman of the purchasing firm, Hangzhou Granshores Weichaeng Technology, owns 9.7% of Canaan shares.
The complaint further alleged that Canaan quietly removed some distributors from its website prior to the IPO, and also claimed that some of the company's stated clients are not likely to be in the bitcoin mining industry at all.
Notably, the complaint cites heavily a February 20 blog post by Marcus Aurelius Value, which states at the outset that "we are short Canaan (NASDAQ: CAN)." The complaint included excerpts from the blog post under the section "The Truth Emerges."
The class action status of this case is still to be determined by the court. Rosen Law Firm, which is representing Lemieux and put out an announcement about the lawsuit on March 3, is calling for more Canaan investors to join the class action. Rosen Law Firm announced an investigation into Canaan, citing Marcus Aurelius Value's report, on February 21.
Canaan, an Hangzhou, China-based company, went public on Nasdaq last November, raising $90 million at its opening. Its stock performance has remained tepid since the debut, although it briefly surged by more than 80% on February 12. The stock's price was $4.83 per share at today's market close.
A copy of the complaint can be found below:
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