Argo Blockchain Stock Sale | What you need to know about ARB

Bitcoin miner Argo Blockchain (ARB) faces challenging business conditions in 2022 characterized by high energy prices, rising interest rates and a downturn in the cryptocurrency market.

The company has sold its mining equipment, a 15% stake sale and bitcoin holdings to shore up working capital until favorable economic conditions return.

As cryptocurrency miner Core Scientific became the latest to flag bankruptcy risk, investors have steered clear of the bitcoin mining sector in 2022.

As of October 28, 2022, Argo Blockchain’s London-listed shares have fallen over 80% year-to-date. Will the Argo Blockchain share price extend the selloff? Here we take a look at what the Argo Blockchain share sale means for the price.

What is Agro Blockchain?

Argo Blockchain is a cryptocurrency mining company based in London, England. The company’s primary listing is on the London Stock Exchange (LSE) under the ticker ARB.

In September 2021, Argo Blockchain listed its American depositary shares (ADS) on the Nasdaq exchange in the US under the ticker ARBKL.

Argo Blockchain started as a mining-as-a-service company before changing its strategy to own and operate its own mining facilities. The company’s flagship mining facility is located in Texas, USA. It owns two other mining facilities located in Canada.

A majority of the company’s revenue comes from transaction fees and cryptocurrency rewards generated via bitcoin (BTC) mining. Another crypto Argo Blockchain mines is the proof-of-work (PoW) cryptocurrency Zcash.

Argo Blockchain Inventory Sales: Sector-Wide Decline

Argo Blockchain is not the only bitcoin miner to see its shares fall in 2022. The entire cryptocurrency mining sector is currently facing its toughest trial yet.

Bitcoin miners are in survival mode. They are actively cutting costs and limiting mining to make it through this period of high electricity costs and low cryptocurrency prices.

US-listed bitcoin miner Core Scientific was the latest company to flag liquidity concerns. The company said in an SEC filing in late October 2022 that it will default on upcoming equipment and financing payments due in October and November.

Core Scientific added that it could “seek relief under applicable bankruptcy or insolvency laws” as it expected “existing cash resources will be exhausted by the end of 2022 or earlier”.

It’s not just high electricity prices and the crypto bear market that are hurting the biggest bitcoin mining companies. The global bitcoin network hash rate, which measures the difficulty of mining bitcoin, rose to a record high in October 2022, which has squeezed mining profitability.

Argo Blockchain reported that it mined less bitcoin in September compared to August due to an increase in average mining difficulty and reduced operations during periods of high electricity prices.

In recent months, Argo Blockchain has taken steps to strengthen its balance sheet and stem further declines in the ARB share price.

According to an October 7 press release, the company amended its existing equipment financing agreement with a subsidiary of New York Digital Investment Group. The new deal released an additional GBP 5 million ($5.7 million) in cash and changed debt repayment deadlines.

Argo Blockchain also sold 3,400 new bitcoin mining Bitmain S19J Pro machines for £6 million while signing a profit sharing agreement to host the sold mining equipment.

In addition, Argo Blockchain raised £24 million by selling 87 million shares at £0.276 to an undisclosed investor who will own 15.46% of the company following the deal. Cryptocurrency miner said:

“The Company believes that its working capital will be sufficient for its current needs, that is, for at least the next twelve months from the date of this announcement.”

According to its interim results, Argo Blockchain’s short-term borrowings stood at around £43.9m as at 30 June 2022. The company’s total carrying value of financial liabilities, which included its long-term borrowings and debt securities issued, stood at over £135.6m as at 30 June 2022.

Argo Blockchain has been selling its bitcoin holdings to fund its liquidity in recent months. The company’s bitcoin holdings fell to 512 BTC at the end of September 2022 from 1,953 BTC held at the end of June 2022.

Analyst Expectations for Argo Blockchain Shares

Investment firm Jefferies said in a note dated August 25:

“ARBK is on track to approximately double its mining capacity by the end of 2022 (from YE21), and we expect revenues to increase ~40% from FY21 to FY23. By owning its own mining facilities, ARBK will be able to keep operating costs lower in the long term. I Additionally, ARBK’s focus on sustainable energy and potential upside from DeFi investments sets the company apart from its peers.”

Jefferies rated the share buy and set an Argo Blockchain price target of £41 for its London-listed shares and $4.93 for its US-listed shares.

Four out of seven analysts rated the stock a “hold” while the rest rated it a “sell” based on ratings compiled by MarketBeat from 28 October. The consensus price target for US-listed Argo Blockchain shares was $10.50, ranging from a high of $27 to a low of $3.

Note that analysts’ predictions may be wrong. Forecasts should not be used as a substitute for your own research. Always do your own due diligence before trading, look at a wide range of analyst currencies, latest news, technical and fundamental analysis. Remember that past performance does not guarantee future returns, and never trade money you cannot afford to lose.

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