Blockchain mining company Argo Blockchain (ARB.UK) reported yesterday that it is in advanced negotiations to sell some assets and equipment financing to bolster its balance sheet and improve liquidity. The company conveyed that it hopes to be able to execute before filing for Chapter 11 bankruptcy in the U.S., but 'there is no certainty' about that. Shares are losing nearly 40% after the London Stock Exchange suspended trading:
- Argo pointed out that a draft saying it had filed for bankruptcy protection was accidentally published on its website last week, leading to a drop and suspension of trading in both UK and US stocks last Friday;
- Trading on the LSE was reinstated, with the shares opening with a huge downward gap. The shares have already lost about 95 percent of their value over the course of this year and have fared the worst of any listed mining company;
- Argo had been trying to raise between $25 million and $35 million since late August. By November, it became clear that the company needed these funds to survive. After a $27 million deal collapsed in October, the company warned that it could soon have negative cash flow as a result of rising mining costs and the falling price of Bitcoin;
- Argo has built a massive bitcoin mining facility in West Texas, dubbed Helios. The facility began operations in May with a plan to achieve 800 megawatts (MW) of energy consumption and 20 exahash (EH/s) of computing power. It would make Argo one of the largest miners in the world. However, problems have exceeded expectations, with costs associated with the facility exceeding revenues and margins shrinking in the months following its opening;
- The mining industry is experiencing a huge problem due to energy prices and the dismal sentiment of the mining market. The company was particularly hard hit by the effect of energy prices, as the Helios facility did not have a fixed-rate contract for electricity.
Bitcoin's mining industry is experiencing its biggest crisis since May 2021, when Chinese regulations forced most miners to move business out of China. The difficulty of mining has dropped by 7.23% which means that a sizable amount of active computing power has been 'turned off'. In simpler terms, this means that some miners are turning off their 'diggers. Source: Glassnode
The profitability of Bitcoin mining has reached a bottom despite this, spot prices at $17k were 70% higher than in October 2020. (BTC cost about $10k at the time), the amount of available computing power on the market competing to find the next Bitcoin block is now 70% higher. Source: Glassnode
Shares of Argo Blockchain (ARB.UK), W1 interval. The Bitcoin mining company's shares have almost completely given back the powerful gains of the recent 2020-2021 bull market. Other BTC miners have also come under pressure, including Riot Blockchain (RIOT.US, yellow chart). Listings of mining companies this year have lost far more than bitcoin itself. Source: xStation5
