Argo Blockchain abandons strategy six months after IPO #ARB
Crpyto-currencies have always struck me as a dangerous and possibly worthless category of investment. Listed crypto-currency companies, on the other hand, are an even more explosive source of risk.
As I discussed in an edition of the SCVR last August, Argo Blockchain (ARB) dialled up risk to the maximum possible level (latest share price 3.125p, market cap £9 million).
It wasn’t enough for it to merely mine crypto-currencies on its own behalf. That alone would be an adventurous proposition – riskier than gold mining, since the price of crypto-currencies is more volatile than the price of gold. If the coin you are mining reduces in market value beyond a certain level, then your mining equipment becomes worthless (unless it can be deployed to some other use).
Argo took things to another level – it sought out amateur investors who would rent its crypto mining equipment, for a fee. Risk and complexity, layered upon risk and complexity. Since the NASDAQ tech boom has stimulated a love for investment buzzwords, Argo decided to call this “Mining-as-a-Service”.
Argo raised £25 million from investors for an implied company valuation of almost £50 million just six months ago.
Today, its strategy lies in ruins as it announces that it is “temporarily” abandoning the Mining-as-a-Service product.
Cash has reduced to £15 million. Besides abandoning its customer offering, the company is cutting costs so that it can get to EBITDA breakeven in H2 2019. From now on, it will only mine coins for its own account, not for customers.
That makes for a much more sensible strategy, in my book. If it’s profitable to mine, then why not simply mine? There’s no need to bother with “Mining-as-a-Service” for amateur investors.
And with the company trading a significant discount to its cash balance (£9 million vs. £15 million), it’s possible that there are value-based arguments for getting involved in ARB shares at this level.
But will it be able to mine profitably on its own account? I would have some concerns on that front. Here are the 1-year price charts for the coins which Argo mines:
Bitcoin Gold (all charts are from coinmarketcap.com).
I suspect that most (probably all) of these coins are headed for worthlessness in the long run, so I would not be tempted to dabble in ARB shares.
But if you think that there is still life in the cryto-currency space, then perhaps buying into ARB at a discount to net cash might not seem like such a crazy idea.