Toward the end of June 2019, news emerged that the mining giant Bitmain might be reviving its initial public offering (IPO) plans. As Bloomberg reports, the China-based cryptocurrency mining hardware producer is allegedly preparing to file documents with the United States Securities and Exchange Commission (SEC) to hold its share sale on U.S. soil.

Bitmain — being the largest player in the mining sector — first attempted to go public in the second half of 2018, but soon was heavily damaged by the intensifying crypto bear market. Now that the industry has entered a much more optimistic, bullish phase, the company might be looking to recoup its losses.

The world’s most powerful crypto mining giant: A brief introduction to Bitmain

Bitmain was founded in Beijing in 2013 by Jihan Wu and Micree Zhan Ketuan. Prior to starting the joint venture, Wu was a private equity fund manager with a degree in economics and psychology from Peking University, while Zhan, a graduate of the Chinese Academy of Sciences, was managing a television-streaming startup.

After learning about Bitcoin (BTC) in early 2011, Wu allegedly invested all of his life savings into the cryptocurrency. Following the Bitcoin price spike in 2013, he allegedly decided not only to trade the digital asset, but to find an efficient way to generate it. Together, Wu and Zhan began developing an ASIC chip — a machine that would allow mining Bitcoin at maximum efficiency. In November 2013, Bitmain’s first mining rig — the Antminer S1 — was presented, and the sales took off.

Due to the unstable nature of its business, which largely depends on cryptocurrency prices, Bitmain has been through some difficult periods. According to Wu, the company experienced its first rough patch close to the end of 2014, when the crypto market collapsed following the infamous Mt.Gox crash. At some point the next year, BTC’s price began recovering, and the overall situation stabilized.

Related: ‘CoinLab Is a Big Stopping Block’: Mark KarpelesTalks Mt. Gox Creditor Claims and Life After Trial

Consequently, when the 2017 crypto bull run broke out, Wu and Zhan’s venture became largely lucrative. That year alone, Bitmain booked $2.5 billion in revenue, as Wu told Bloomberg. The first half of 2018 turned out to be even more profitable: According to the company’s prospectus, its revenue was set at $2.8 billion by the end of June 2018. A different report issued by investment research company Bernstein cited even larger figures, suggesting that Bitmain made between $3 billion and $4 billion in operating profit in 2017 and even outraced U.S. technology corporation Nvidia, which made about $3 billion during the same period.

In May 2018, following the news about increased scrutiny on crypto mining operations in China,

Bitmain announced its expansion into artificial intelligence (AI), in which it planned to compete against Nvidia, Intel and AMD using its existing chip designs to power AI systems and software. “As a China company,” said Wu, “we have to be prepared.” He added that Bitmain plans to start earning as much as 40% of its revenue from AI chips within five years.

As of February 2018, before the so-called “crypto winter” came, sales of Bitmain’s mining chips and circuits reportedly accounted for around 70% to 80% of the whole market, while the company’s mining pools — AntPool and BTC.com — represented roughly 40% of the market share. However, once the crypto bear market intensified in the second half of 2018, Bitmain’s revenue was endangered once again. As of January 2019, the company’s mining pools had contributed to just 23% of the total hashing power, suggesting that Bitmain experienced major losses.

Further, according to a BitMEX research report released in August last year, Bitmain had been selling a substantial share of its mining units at a loss throughout 2018. The paper suggested that it was a deliberate strategy “to squeeze out their [Bitmain’s] competition by causing them to experience lower sales and therefore financial difficulties” — indeed, at the time the paper was released, the price of Bitcoin was hovering at around $7,000, which was still above the break-even cost of Bitcoin mining.

However, as previously noted by Cointelegraph, when the bear market set off in November 2018, and the price of bitcoin fell below the breakeven cost of mining of $6,900, Bitmain should have started to experience significant financial difficulties. Indeed, within the several months that followed, the Chinese company closed offices and suspended operation in a number of countries, including the U.S., the Netherlands, and Israel. Additionally, Bitmain reportedly announced internal job cuts.

Amid the streak of bad news, in January 2019, both Bitmain’s co-founders, Wu and Zhan, stepped down as co-CEOs, although they continue “to guide the company’s strategic development,” according to the announcement. Notably, Bitmain recognized the market-induced losses in a March 2019 statement:

“The bear market at the end of 2018 brought both challenges and opportunities that Bitmain will work hard at addressing in 2019. In fact, we have already started with competitive products that meet the needs of our customers.”

Bitmain IPO plans: Old and new

In the most basic sense, an IPO is a more traditional and regulatory-friendly way for a company to seek investments from a broader audience in the public market. In June 2018, reports emerged that Wu was planning to conduct an IPO overseas. Wu was reportedly looking for a market with U.S. dollar denominated shares — like Hong Kong — as it would allow early backers to cash in funds.

Related: The Crypto IPO Race Is On: From Mining Companies to Exchanges

Next month, BitMEX Research analyzed the allegedly leaked data on the potential Bitmain IPO and declared that the Chinese mining giant had conducted a pre-IPO round that reportedly raised around $14 billion, suggesting that no less than $20 billion could be raised during the IPO stage, which would make Bitmain the largest public crypto company by far.

In September 2018, Bitmain officially filed for an IPO on the Hong Kong Stock Exchange (HKEX). However, the crypto mining giant’s plans to go public soon turned uncertain, as companies that were previously listed as Bitmain investors began denying their involvement.

Hong Kong-based newspaper SCMP soon added fuel to the fire, reporting that the HKEX is reluctant to allow Bitmain to conduct an offering in the city. According to the publication’s anonymous sources, the regulator thought it was “premature for any cryptocurrency trading platform — or business associated with the industry — to raise funds through an IPO in Hong Kong before the proper regulatory framework is in place.”

In March 2019, Bitmain’s filing with HKEX was lapsed — which came as no surprise to some, given that HKEX had previously treated the IPO application of Canaan, Bitmain’s competition on the mining market that also had plans to go public in Hong Kong, in the same manner.

While neither the stock exchange nor local regulators have ever spoke on the matter publicly (apart from HKEX’s statement that it does not “comment on rumors,”) Bitmain eventually confirmed that its filing had reached its six-month expiration date. The company’s press release read:

“We do recognize that despite the huge potential of the cryptocurrency and blockchain industry, it remains a relatively young industry which is proving its value. We hope regulatory authorities, media, and the general public can be more inclusive to this young industry.”

“We will restart the listing application work at an appropriate time in the future,” the announcement continued — and, as per Bloomberg, the Bitcoin mining giant is already preparing to file listing documents with the SEC as soon as next month. Notably, the SEC has accepted the idea of a cryptocurrency-related IPO in the past. “If you want to do any IPO with a token, come see us,” SEC Chairman Jay Clayton declared last year.

According to Bloomberg’s undisclosed sources, Bitmain “is considering reducing its earlier fundraising target due to the increased volatility in cryptocurrency prices.” The new goal is reportedly set at a much more modest $300-500 million, though the amount has not been finalized.

Experts attribute the alleged reactivation of Bitmain’s IPO plans to the growing market, considering that Bitcoin alone has gained around 300% since the 2018 lows. “It’s definitely due to the reviving market,” Mark D’Aria, CEO of Bitpro Consulting, told Cointelegraph. He went on to elaborate:

“Their [Bitmain’s] last IPO attempt was a bit late to the party, and this looks like a clear attempt to start that ball rolling and ride the wave before it crests again. Their initial target was too optimistic in reality, although to be fair, everything was more than a little optimistic back then. Also, given how much crypto there is on their balance sheets (quite a bit of which was BCH), it’s also likely a reflection of how the underlying assets of the company simply aren’t what they used to be on paper.”

TradeBlock's director of digital currency research, John Todaro, has confirmed to Cointelegraph that Bitcoin mining’s gross profit margins — and, consequently, the mining market at large — has recovered “quite substantially” from late 2018 levels. That, in Todaro’s view, could lead to “renewed investor interest” in a Bitmain IPO.

“Additionally, Bitmain's bitcoin mining market share (as a percent of total network hash rate) has increased recently, possibly, in anticipation for an IPO filing,” the researcher added. As a result, Todaro argues, the Chinese giant might be eyeing a much more realistic share sale:

“Bitmain would likely look to offer less equity in this round, but also would likely look for a lower valuation than last year given Bitmain's mining revenue was expected to continue to decline as bitcoin market prices fell through 2018 and remained dampened in early 2019. Additionally, Bitmain's bitcoin mining market share today remains lower than when the company looked to go public in 2018.”

But why would Bitmain need to go public in the first place? Both D’Aria and Todaro suggest that the reasons are quite prosaic: The mining outfit could simply be looking to boost profits. The BitPro CEO told Cointelegraph:

“At face value they could use the funds raised to fuel R&D and operations, so they’re no different than any other tech company in that regard. It also gives current ownership and investors a way to cash in or out on a liquid market, but again that would be no different than the intent behind any other IPO. It’s always easy to demonize Bitmain and assume there is some nefarious plot behind their behavior, but in this case it just looks like they’re doing what companies do, for the same reasons that other companies do it.”

Todaro somewhat echoed the viewpoint, but specified that the end goal could be anything:

“If the company goes public, they would look to use the capital to drive increased revenues, with the intention of over time boosting profitability. It remains unclear however, as to what the exact intended use of the capital would be for.”

In theory, funds raised could also be used to mitigate some of the losses Bitmain experienced while the market was going downhill, namely a 200,000 unit-strong mining facility in Rockdale, Texas. The experts are somewhat skeptical about Bitmain’s aforementioned expansion into the field of AI, however. D’Aria also told Cointelegraph about the outfit’s diversification plans:

“I’m somewhat suspicious that their AI plans are little more than wishful thinking to placate potential investors because nothing they’ve done previously shows they have competence at building anything but ASIC miners. I’m certain nvidia isn’t shaking in their boots at the thought of Bitmain entering the AI market. I personally think it would be foolish for Bitmain to take their eye entirely off the ball. But like any good company they’re always looking to pivot and/or expand into related markets.”

Torado expressed a similar view, suggesting that crypto mining-related crackdowns in China are more likely to drive Bitmain into other markets rather than make it focus on alternative sources of revenue:

“Bitmain may look to increase its exposure to AI, but its core business will likely remain around hardware sales and proprietary mining. In regards to recent developments around China cracking down on mining activity, Bitmain retains a global footprint, and may look to diversify its mining operations outside of China, ideally in other low electricity cost regions.”

Nevertheless, Bitmain seems to be steadily recovering on both the AI and cryptocurrency mining frontiers. The company has recently reported on the AI side of its business, announcing that it had signed cooperation agreements with the Fuzhou Municipal Government of Fujian Province, China Mobile Hangzhou Research and Development Center and China Unicom Network Technology Research Institute. Additionally, Bitmain declared it was “rolling out different generations of neural processors, which are fast finding wide acceptance among established tech companies, such as cloud gaming provider Ubitus.”

Nevertheless, Bitmain’s main focus seems to remain on its hardware solutions: The company has been unveiling new, allegedly more energy-efficient products, such as the Antminer Z11. Moreover, according to reports from China-based media, Bitmain hopes that the next Bitcoin halving in 2020 (which happens about every four years and is when the reward for mining Bitcoin is cut in half to cap the cryptocurrency’s supply) will drive the demand for its yet-to-be-launched 7nm-chip miners.

Cointelegraph has requested Bitmain to confirm or deny the reported IPO plans, but has yet to hear back from the company.