Argo Blockchain (LSE: ARB) shares fell 23% in January, taking them to a 12-month decline of 25%. But that hides a far more riveting picture, as 12 months ago the Argo Blockchain share price was just beginning to soar. It reached an all-time high of 360p in February, before the downwards slide set in.
From that 2021 peak, Argo shares had lost a painful 79% by the end of January. So what’s behind Argo’s continuing poor performance in the new year so far? And does the price fall mean I should buy?
The declining Bitcoin price is a part of the picture, dropping 17% during January. But since the day Argo shares sat at their 2021 high, the cryptocurrency’s value dropped by 33%. That’s less than half the Argo share price fall over the same period.
Future cryptocurrency stream
Of course, there’s unlikely to be a one-to-one correlation between Bitcoin and the Argo share price. At the end of December, Argo held 2,595 Bitcoin or Bitcoin Equivalent. That’s worth approximately £72.4m at today’s price, while the company’s market cap stands at £337m. The stock’s valuation is clearly based on Argo’s likely future mining stream, and possibly other opportunities, in addition to its current crypto holdings.
An update on one of those opportunities on 19 January might have given the Argo Blockchain share price a minor boost. At least, the shares gained 7% the next day. It was all about Argo Labs, which the company describes as its “in-house innovation arm established to identify opportunities within the disruptive and innovative sectors of the cryptocurrency ecosystem while supporting the decentralization of various blockchain protocols“.
It seems “Argo has allocated approximately 10% of the Company’s crypto assets in its ‘HODL’ to Argo Labs“. The downward trend did continue immediately afterwards, mind.
Short-seller allegations
I have not yet touched upon a major contributor to the ARB share price downfall. Short-seller Boatman Capital has issued a number of worrying claims, critical of various aspects of how the company is run. In a 6 December report, Boatman suggested “avoiding a company that appears to have displayed serious governance failures and has significantly diluted investor shareholdings over the past year“.
Boatman reckons Argo’s purchase of land in Texas for its new crypto mining facility, worth up to $17.5m, was “about 100x more than the value of the land“. The same report made claims of Argo taking on expensive new debt, while having $5m in cash stashed away.
Argo Blockchain share price pressure
The effect of Boatman Capital’s allegations will surely be helping hold back the Argo Blockchain share price as we progress into 2022. Then again, we often see short-seller criticism of companies come to nought in the long run. So where will the Argo share price go over the course of the year? That will surely depend on the Bitcoin price. And on any further fallout from Boatman’s claims.
I do think there is potential in buying a crypto miner, especially one whose share price has crashed so hard. And I have been looking at ARB over the past couple of months thinking “Should I?” But the uncertainty and risk are still too much for me.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
