The past year has seen Bitcoin rise meteorically as the effects of the Bitcoin halving have taken hold, it’s been a fantastic time for investors as once again records have been broken as BTC has hit all-time highs over and over again. But let’s share a moment for those who have been left behind, the fallen soldiers, the victims of the bear market. Crypto is a brutal market and only the strongest and bravest survive. Argo Blockchain was the darling of the previous bull cycle, however it fell on hard times as the Bitcoin price tumbled, leading to a series of events where debt increased drastically, just as mining profitability evaporated. So where did it all go wrong for the once mighty ARB?
1. Pre‑2020 Rise & 2020‑21 Boom
Founded in 2017, Argo Blockchain did not find immediate success. Initially the shares drifted lower as attention turned away from Bitcoin after the crypto winter set in, having hit highs of $19,834 in December 2017, trouble soon brewed by early 2020 with the Covid pandemic shutting down world economies, Bitcoin suffered considerable losses, dropping below $4k as panic took hold.
With people stuck at home, boredom set in, and attention soon turned towards the world’s financial markets, as a new generation of traders entered the market. Bitcoin soon recovered, hitting an all-time high by November 2020. By early 2021, euphoria had set in, and the crypto economy seemed unstoppable.
Argo Blockchain were one of the big winners as retail investors desperately sought crypto exposure through their ISAs and pension funds. By summer 2020, Argo shares were trading around 5p/share; then early 2021, they soared to a high of £2.82. Early investors laughed all the way to the bank, well, those shrewd enough to sell anyway. Fuelled by optimism outrageous share targets where thrown around, everyone was getting rich, but as so often happens with assets that get blown into an almighty bubble, the bubble burst, and this led to one of the most painful grind downs I have ever witnessed on the London Stock exchange.
During the hype, Argo raised a phenomenal £144m and a further £29m in unsecured notes to build a state-of-the-art mining facility in Helios and acquire mining rigs, thereby increasing the company’s hash rate. Total debt hit £53.7m by the year end. In order to finish Helios phase 1, Argo Blockchain had forecast £93-100m Capex, this would be needed to kit the plant out with mining machines and the infrastructure required for the facility.
2. Mounting Debt & Capital Raises
By early 2022, ARB secured equipment financing from NYDIG, ultimately borrowing a staggering £19.8 million for additional mining rigs. The debt for the Helios facility had now reached an eye-watering $97m. This occurred during the onset of the crypto winter as Bitcoin first tumbled towards $20,000 before ending the year at less than $16,000.
By mid-2022, the total group debt had reached $143m, with $97m owed to NYDIG alone. The euphoria was well and truly over, and reality had set in for investors as more and more ran for the exits. The few brave souls who were still bullish averaged down again and again.
The share price was severely impacted, hitting a low of just over 2p per share in December 2022, after starting the year at around 80p per share. Things were simply going from bad to worse for the embattled Argo Blockchain.
3. Bitcoin Price Fall & Bitcoin Halving Impact
Bitcoin’s 2022 crash, followed by the halving in April 2024, severely hit ARB’s mining profits. It was the perfect storm, not just for Argo Blockchain, but the entire BTC mining community. As the halving hit, mining rewards were squeezed as Bitcoin itself continued lower, dropping below even the 2017 high in an unprecedented moment; some proclaimed Bitcoin was dead, it looked like the end for the worlds oldest cryptocurrency.
To add to ARB’s pain, a heatwave hit Texas during the summer of 2022, power costs soared, eroding returns even further, despite a fixed-rate PPA. With Bitcoin mining being so power-intensive, the industry’s feasibility was thrown into doubt. Nothing appeared to be going right.
4. Helios Facility: Land, Build & Cost
Helios finally opened in May 2022 in Dickens County, Texas, on a newly purchased 160-acre plot of land. With an initial power capacity of 200MW, with further potential to expand to a massive 800MW.
The final CAPEX expenditure was estimated at $125-135m to complete Phase 1, all the while under financial pressure from the ongoing Bitcoin bear market and increasing mining difficulty. The pressure was really on for beleaguered miners.
Equipment borrowing alone was in the region of $91m during this period of uncertainty. A further $26.7m of financing was added for infrastructure, further adding to the company’s woes.
5. 2022 Liquidation & Rescue Deal
By late 2022, things had gone from bad to worse for ARB, the Bitcoin halving seemed a lifetime away, mining profitability had evaporated, and with no large HODL like Riot or Mara, Argo Blockchain warned of the possibility of bankruptcy as the mountain of debt topped $143m.
December 2022 was crunch time:
The Helios site and land were sold to Galaxy Digital for $65 million, reducing its debt by $41 million. The company then took a $35m asset-backed loan from Galaxy, collateralised by Argo’s mining fleet of 23,619 Bitmain S19J Pro Rigs. Net proceeds went into repaying $84m owed to NYDIG and $1m to North Mill. The dream it appeared was over, the crown jewel of Argo’s crown, the freshly built Helios site was gone, its rigs, held to ransom, things could not have got much worse.
6. Post‑Rescue Struggles
Despite all of its struggles, Argo Blockchain survived into 2023 and managed to continue to repay its debt to Galaxy, trimming interest costs ($22m in 2022 ↓ to $11.6m in 2023). Incredibly, the board managed two equity raises, one in July 2023 for £7.5m and a further £9.9m raised in January 2024, both of which were used for debt repayment and ongoing operational costs. By Q2 2024 miraculously the Galaxy debt was fully repaid .
Despite initial hope that a recovery would be possible post halving, recent news has seen the company once again warn of potential bankruptcy, casting further doubt on whether the company will continue as an ongoing concern. As it stands at the moment, I personally can not see any reason why anyone would want to invest in the company. It looks as though dark days are ahead for those still invested, maybe there could be a lesson in this for investors chasing this years hottest stocks?
In my opinion, the business model of Bitcoin mining operations is fundamentally flawed, which is likely why there has not been significant interest in the miners this time around. Firstly, a company’s value is often derived from its BTC HODL. This naturally makes mining companies reluctant to sell Bitcoin during the highs of the bull run, only for the asset to be offloaded during the bear market at a discounted rate, or alternatively to keep relying on capital raises to keep the lights on. As they said in the old west – mine the miners – want to get involved with crypto stocks? Look for the nearest thing to a “picks and shovels” narrative.
Disclaimer: Nothing contained within the article should be considered investment advice; please do your own research. The facts and figures are correct to the best of my knowledge, but may be incorrect. Please clarify and fact-check for yourself. Everything contained within this article is my personal opinion. I am not invested in Argo Blockchain.
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