Recently Argo Blockchain (ARB) announced a “Strategy Update” including “as a result of the challenging conditions, the company has ceased accepting new mining subscriptions and will terminate all existing mining-as-a-service contracts by 1st April 2019”. Particularly not good as the company only listed in August 2018! – that at 16p in an IPO our own Tom Winnifrith stagged (unsuccessfully); by the time of the noted announcement the shares had fallen to around 3p – but they have now recovered a bit and there looks a good chance of more to come…
The bad... Let us not kid ourselves. This company may have fooled Tom - who admits that he did not read the prospectus and bought "because a man told him to" - but we do not pretend it is a great business; on IPO, the company was stating “the directors believe that there is significant pent-up demand for a user-friendly and cost-effective Mining as a Service”, with it “established in December 2017 to develop a global datacentre management business facilitating cryptocurrency Mining as a Service to be available at scale to anyone, anywhere in the world”. The service went live in June 2018, initially covering Bitcoin Gold, Ethereum, Ethereum Classic and Zcash. As recently as December the company updated including that it was; …“pleased to announce continuing strong growth as sales of its subscription packages continue to exceed supply and the company's expectations. The total number of sold packages increased by 146 per cent from 4,200 as at 1 October to 10,325 as of today after a new batch of mining packages sold out immediately on release to the market… Argo estimates its current annualised revenue run-rate at approximately $6.2m… Argo's long-term prospects remain bright and we look to the future with confidence”. Just a couple of months later though, the announcement of “in light of the continuing difficult trading conditions in the cryptocurrency market as digital currencies face severe price pressure and volatility… a refocus of its business strategy… to ride out the downturn and be in a strong position when industry fundamentals improve”.
The potential... We severely question whether the industry fundamentals will improve… but consider for a good return from here we should not need them to as the company is shuttering its Mining as a Service operation and slashing costs. It will do some in-house mining but aims to be at breakeven by H2. The 30th June 2018 balance sheet showed net current assets of £0.54 million and the IPO raised an anticipated £22.78 million net of expenses. The December update included “net cash amounted to approximately £15m” and the latest update that “as of February 14th, the company's net cash balance amounted to approximately £15m”, with also “significant cost-cutting which is expected to lower its mining cost base, including ongoing expenses, by 35%... expected to… deliver EBITDA break-even in the second half of 2019”.
We also understand that shareholder Richard Jennings is intensely lobbying and gaining traction for a share buyback. And that is what the attraction is. We reckon that buying now should give you a very decent chance to sell at 4.5p (market cap £13.2 million - still a discount to cash) as Jennings ramps up his campaign. A buy, targeting a sell at 4.5p+ within the next couple of months.
Filed under: Argo Blockchain, Brexit, Crest Nicholson, Next, Optibiotix, LPA Group, short selling, Wirecard
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