Bitcoin mining company Canaan (CAN) is looking to monetize more of its cryptocurrency reserves to support share buybacks as its mining equipment business experiences a sharp decline in sales.

On Tuesday, the company launched a $20 million stock repurchase program under a broader $100 million authorization approved by its board on November 6. Management plans to increase buyback activity as additional funds become available.

Canaan’s stock has fallen approximately 75% this year through Wednesday’s market close, reflecting growing pressure on its business performance.

The company’s mining hardware segment recorded just $4.8 million in third-quarter revenue, a 96% decline from the $118.6 million generated during the same period last year. Canaan attributed the weakness to declining customer demand and lower equipment selling prices.

By comparison, its proprietary Bitcoin mining operations generated $9.5 million in revenue, almost twice the contribution from hardware sales.

CEO Nangeng Zhang said Canaan intends to maintain its long-term digital asset treasury while selectively converting cryptocurrency holdings into cash to finance share repurchases.

Canaan Turns to Bitcoin Sales for Buyback Funding

Previous disclosures indicate that Canaan has already used cryptocurrency sales to support its stock repurchase strategy.

In an October update, the company disclosed selling 3,952 ETH and 54.5 BTC for approximately $13.9 million. It used $5.4 million of the proceeds to repurchase 13.6 million American depositary shares (ADSs), which represent its Nasdaq-listed shares, in late August.

However, Canaan’s latest buyback initiative comes as a large portion of its remaining Bitcoin reserves is already committed to other financial arrangements.

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

This left 517.5 BTC classified as directly held cryptocurrency assets, worth approximately $43.7 million at the end of the quarter.

Canaan also reported $72.8 million in cash and restricted cash. However, $50 million was backing a letter of credit tied to infrastructure commitments, leaving approximately $22.8 million outside the restricted balance.

Crypto Revaluation Gains Offset Quarterly Operating Loss

Despite reporting a $42.9 million operating loss in the third quarter, Canaan managed to record an $8 million net profit.

The positive result was largely supported by gains from the revaluation of cryptocurrency holdings and financial derivatives as Bitcoin traded at a higher price toward the end of September.

Management maintains that Canaan’s stock does not fully reflect the company’s underlying business value and future growth potential.

The $100 million share repurchase authorization will remain valid for 12 months, allowing the company to determine the pace of buybacks based on its funding availability, financial position, and operational requirements.