Chinese Chip Designer Nano Labs IPO Tied to Grin Crypto Mining Sector and Metaverse

Launching an IPO is much to do about market timing. Unfortunately, Nano Labs, a fabless chip designer in China focused on cryptocurrency mining couldn’t have timed it worse. Cryptocurrencies have crashed, Crypto mining has been savaged by energy costs and China is continually at odds with the U.S. Nano Labs listed on the Nasdaq on July 12, 2022 under the symbol NA after it raised $20 million by offering 1.8 million ADSs at $11.50

The offering was near the top of the revised range of $11.35 to $11.51. The Hangzhou-based company originally planned to offer 3.5 million ADSs at a range of $9.50 to $11.50, before revising the terms last week. Only about 6% of its outstanding shares were sold in the IPO.

Nano Labs Trading Debut

Nano Labs made its trading debut on the Nasdaq on July 12, 2022. A combination of day trading rooms and algorithms helped the stock rise nearly 4.8% on its first day of trading. On day two however it failed to attract fresh buyers and fell sharply tumbled 27%. No surprise really given the bear market, a Chinese issue and the high volatility in the crypto market.

AMTD Global Markets, Maxim Group LLC, and Tiger Brokers acted as joint bookrunners on the deal.

Last year, Nano Labs’ sales increased more than 18 times as it ramped up production. Its annual revenue is still only about the equivalent of $6 million. That figure was easily dwarfed by the company’s operating expenses which exceeded $27 million, the bulk of which were for research and development. The company has a very heady price-to-sales (P/S) ratio of 107, based on Monday’s closing price.

Grin and Bear It

Investors worry about its heavy dependence on chips used to mine a lesser-known digital currency named Grin. Which has only become more of a risk with the Bitcoin and other coins price collapse. In May 2019, a unit of Grin was valued at more than $6, with its daily trading volume exceeding $50 million. Today the virtual coin isn’t even worth $0.10, and less than $100,000 worth of the currency now changes hands on a typical day.

Nano Labs began shipping new chips used to mine other crypto coins, including Bitcoin and Ethereum this year.

Metaverse lifeline?

“I am earnestly confident that the metaverse will open a new era for humankind. To this end, it is my intention that Nano Labs will be committed to developing the power of the metaverse and walking among the key players to help the world explore and cognize the metaverse,” said Nano Labs CEO Kong Jianping in a letter included in the company’s IPO prospectus.

About Nano Labs Ltd

Nano Labs Ltd is a leading fabless integrated circuit (“IC”) design company and product solution provider in China. Nano Labs was founded in 2019 by a former chairman and a director of Canaan Inc. $CAN, a crypto mining machines manufacturer.

Nano Labs is committed to the development of high throughput computing (“HTC”) chips, high performance computing (“HPC”) chips, distributed computing and storage solutions, smart network interface cards (“NICs”) vision computing chips and distributed rendering. Nano Labs has built a comprehensive flow processing unit (“FPU”) architecture which offers solution that integrates the features of both HTC and HPC. Nano Lab’s Cuckoo series are one of the first near-memory HTC chips available in the market with a maximum bandwidth of approximately 2.27 Tbps, as well as one of the first movers of ASIC-based Grin mining market*.


Disclosure: I do not have a position in Nano Labs at the time of writing.

From The TradersCommunity Research Desk