UK-based Argo Blockchain (NASDAQ: ARBK) has shown a major improvement in performance, based on its latest earnings report, as the dual-listed company seeks to build recognition among US investors interested in Bitcoin mining companies.
Having access to capital markets and initiating continued expansion of its mining capacity, the company is poised for further growth. Like its peers, it will do even better than it has been once Bitcoin price bottoms out and reverses direction sustainably.
In this article, we will look at some of its recent earnings numbers, how it will raise capital in the future, a major weakness it has against its bitcoin mining competitors, and the start of operations at its Texas facility. .
ARBK recently released its 2021 annual results and the company posted solid growth during the reporting period.
Revenue jumped to $100.1 million, a 291% year-over-year gain. This compares to the $25.6 million in revenue generated over the course of 2020. The positive catalysts were an overall Bitcoin price increase, ARGO’s major hashrate increase, and a short-term drop in difficulties with bitcoin. network.
The mining margin also increased from 41% to 84%, mainly due to higher Bitcoin prices and lower global hashrate related to China’s ban on Bitcoin mining in the first half of 2021.
These positive catalysts drove EBITDA up from $10.3 million in 2020 to $71.4 million in 2021, a gain of just under 600%. Net income was $41.5 million, up 2,033% from the $1.9 million generated in 2020. At the end of 2021, ARBK had cash and digital assets of $124.9 million. Of this amount, $16 million was in cash. Although I would have preferred to see more liquidity, his access to capital, as discussed in the section below, helps alleviate some of my concerns.
The company mined a total of 2,045 Bitcoin in 2021, down 17% from 2020. Most of this was attributed to the Bitcoin halving, which halved the price of the block. In March 2022, the company reported an increase in the number of bitcoins held to 2,700. With the continued decline in the price of Bitcoin, the value of these is of course falling. While the assumption might be that ARBK will be under pressure due to the falling Bitcoin price, in reality the price has fallen even further in the middle of 2021, so the comps, at least where the price is of Bitcoin today, are still favorable. Even if it drops further, the company could have a good 2022 if the Bitcoin price rebounds in the second half of the year.
It has some big price to fill due to the big upward movement in Bitcoin price between mid-February 2021 and early May 2021 where it moved in a range of around $50,000 to almost 60 $000. After correcting, it rose above $50,000 again, ending at over $67,000 in November 2021, its all-time high. The point where there is the average for 2021 may be hard to beat if the 2022 highs do not approach these levels, which is certainly a possibility.
Access to capital
One of ARBK’s strengths is its ability to raise capital. In the first quarter of 2021, it raised $66.4 million via a private placement.
It raised another $127.9 million in the third quarter when it went public on the Nasdaq Global Select Market.
In the fourth quarter, an additional $40 million was raised in unsecured debt by issuing senior notes traded on the Nasdaq.
Most recently, its wholly owned subsidiary Argo Helios secured a $70.60 million loan from NYDIG ABL. The loans were secured by mining equipment and contracts entered into to acquire the equipment.
This confirms management’s claim in its earnings report that it was going to use debt and/or the sale of Bitcoin holdings to raise capital in the future. This means that, for now, it will not dilute shareholders by increasing the number of shares in the company.
Launch of operations at Helios
Towards the end of April 2022, the company revised its hashrate forecast upward from previous expectations of 3.7 PE/s, to 5.5 exahash per second of hashrate by the end of 2022.
Much of the upward revision will come from the launch of operations at the Helios mining facility in Dickens County, Texas. This will increase the company’s computing power by 243%, at the rate of 5.5 exahash per second mentioned above. Further, ARBK will use 600 MW more to reach 20 pe/s. How quickly this happens will be determined by when he receives delivery of the 20K Bitmain S19J Pro mining machines he acquired in September 2021. Expectations are that they will be delivered from May 2022 to October 2022. This suggests that the last quarter could be a good one for ARBK, depending on the price of Bitcoin. That said, it will take a few more years to reach the full capacity of the facility.
A major concern
The main concern I have with trading ARBK is that it doesn’t have much liquidity on the Nasdaq, typically trading between 100,000 and 200,000 shares per day.
When I was considering taking a position in the company, I looked at the volume measured on a candlestick chart, and it usually traded below 1,000 shares per candlestick. This means that getting out could be a problem if I held even a relatively small number of shares.
For example, even 100 stocks could represent 20% of the market if only 500 stocks traded hands at any given time. Even a thousand shares would represent 10% of the market if investors held 100 shares.
This easily limits my interest in a position as it reduces the number of shares I am willing to hold due to lack of cash at the moment. That’s why I say ARBK needs to gain some notoriety on the Nasdaq if it wants to attract more investors.
I trade a lot of bitcoin miners, and by far ARBK has the fewest shares traded in a day. The question for me then is, why trade ARBK when I can trade a more liquid company?
I also think ARBK is still trading at a high price compared to many of its peers. With the company now on my radar, I am looking for a lower entry point and increased volume.
ARBK attracts my interest in general. I think this could have some potential as the price of Bitcoin declines, which will put downward pressure on ARKB’s share price.
When investors start to take more interest in Bitcoin miner trading due to the belief that Bitcoin is close to a bottom and a reversal, it is highly likely that ARBK could attract more investors, which would of course increase its volume.
There is no doubt in my mind that ARBK will rise in correlation with Bitcoin price when sentiment improves, but right now there just isn’t enough differentiation from other Bitcoin miners to justify taking a stand.
It’s a shame because it actually deserves more interest from investors due to its performance, but since it’s not yet well known to US investors, it continues to languish in obscurity and illiquidity. . I wouldn’t take a position now, but it’s worth having on your watch list when and if the time comes when it attracts more volume due to renewed interest in Bitcoin miners.