Is Argo Blockchain a good investment? What is Argo Blockchain?
1. Background of Argo Blockchain
Founded in 2018, Argo Blockchain is a publicly traded blockchain technology startup. Its operations span North America, and its headquarters are in London. On the London Stock Exchange, it was traded. Argo Blockchain offers mining-as-a-software services that make it easier for customers to mine Bitcoin, Ethereum, and other virtual currencies in the cloud. According to the Argo blockchain website, the company’s objective is to operate a green and efficient mining infrastructure that supports the top blockchain networks in the world’s continuing development, innovation, and operation.
Argo blockchain is trying to reduce its carbon footprint. The company favors hydropower and solar power as renewable energy sources. In order to use less energy, Argo Blockchain is also working to improve the efficiency of its mining activities. The company has reduced its greenhouse gas emissions by being carbon neutral and assisting initiatives outside of the organization to improve environmental practices. It is climate positive in terms of Scope 1 and Scope 2 and GHG emissions from the value chain associated with mining operations, which makes it the first publicly traded cryptocurrency miner.
2. What happened to the Argo blockchain
Argo Blockchain warned that it would run out of money within a month in a release on December 12 and that it was during “advanced negotiations” to sell certain assets. Contrary to assertions, the mining company’s trading on the Nasdaq and London Stock Exchange (LSE) was halted on December 9 due to “inadvertently released materials” relevant to the company’s financial situation.
(Source: Nasdaq, ARBKL stock price 1Y)
Argo Blockchain revealed that a planned $27 million raise would not go ahead in October. And shares plummeted by 40%.
On December 9, when the report of the London Stock Exchange came out, the stock prices were even lower. Still, when galaxy digital bought Argo blockchain’s mining machines Helios and 35 million loans. The stock price went from $1 to $3 and around $3.5 until 2023 January 5.
3. What Argo blockchain when facing the financing problem
• Sold the facility to Galaxy Digital for 65 million, 35 million secured equipment finance loan with Galaxy Digital, lowering the loan by 41 million
• They issued 87 million shares to investors with a total amount of 15% of the company. • Keeping the mining machine under the control of Galaxy Digital, still able to make profits and mining
4. Reasons why Argo blockchain is facing such a huge financing problem
• The market of Bitcoin is not good, the price of bitcoin fall significantly. The crypto related company is undergoing the winter now, like FTX. A Cryptocurrency company whose revenue was 1.02 billion USD in 2021, went bankrupt. In November 2022, FTX faced a liquidity crisis and searched for bailout funds but failed. The bitcoin prices have dropped from 64,400 dollars in November 2021 to 16,000 right now. The bitcoin market cap has a change of -62.70% from one year ago.
- The price of mining machines doubles or even triples due to Bitcoin prices lower • Argo Blockchain already faced financing problems during September 2022, and the negotiations to raise funds failed.
- Furthermore, according to Argo blockchain CEP Peter wall, the reasons they have of having so many debts are part of electric prices doubling in Texas due to higher heat in summer.
- In addition, the Ukraine-Russia War affects the global economy as well as the prices. The global hash rate continues to climb, and it impacts the bitcoin market.
- Argo’s crisis actually showed up several months ago, and even showed up in 2021. Argo blockchain reported selling 887 BTC to pay its debt, according to the report in July 2022; at that time, the bitcoin price was around $24,500 in June 2022— the total is around $15.6 million. Right now, Argo blockchain company has only 126 bitcoins, according to the news in November 2022, of which 116 were BTC Equivalents.
- The loans are huge beforehand. According to Cointelegraph, Argo blockchain had loaned 21 million from Galaxy Digital in 2021, and Argo and Galaxy Digital previously agreed on a $20 million BTC-backed loan in June. Argo Blockchain CEO sold 1.5 million shares, and the other two executives sold their shares last year.
5. Raising Funds during bull markets and increasing debts during the bear market
Galaxy Digital bought Helios, according to a recent announcement from Argo Blockchain that it has sold the Helios website to the company for $65 million. The site would also be utilized to host the machines for Argo Blockchain. The company later signed a $35 million equipment financing agreement with Galaxy Digital. The net proceeds from the sale were used to pay back NYDIG and another smaller secured lender.
In 2021, Argo Blockchain raised funds through dilutions, most of which came at a significant discount to entice institutional investors. Argo Blockchain increased the number of ordinary shares from 300 million to 478 million in 2021 through dilutions. The company said it had already lowered the debt by 41 million around December 2022 with the help of Galaxy Digital.
Argo blockchain is a company with significant environmental effects and gets help during the dilemma. While it had too many debts. And the debts had since years ago. Its bitcoin reserves are pretty low right now during a year of selling. And its machines had been sold to galaxy digital, with many loans under galaxy digital. Also, the cryptocurrency market is going through a downturn. And it is hard to predict when the prices will come back to November 2021 when it was 64,000. Under such circumstances, Argo Blockchain needs more help to go through it and it is still facing huge problems.
Written by Iris Li