After the FTX debacle, fears of a wave of bankruptcies hang over the cryptocurrency industry like the sword of Damocles. Mining company Argo Blockchain has now managed to stave off imminent insolvency through a deal with crypto bank Galaxy Digital. The title reacts with a jolt of joy, which however should be enjoyed with caution.
Argo Blockchain is selling bitcoin mining farm Helios in Dickens County, Texas, to Galaxy Digital for $65 million, the two companies confirmed Wednesday. As part of the deal, the mining machines installed there – 23,619 Bitmain S19J Pro computers – will initially remain owned by Argo and continue to be operated by the company.
However, the mining equipment is part of the collateral for a new $35 million loan that Galaxy Digital is providing to the company. In recent months, Argo has already sold off a large portion of its cryptocurrency holdings in order to be able to repay previous loans to Galaxy.
The troubled mining company wants to use the new capital to repay or restructure further loans. According to Argo CEO Peter Wall, this will reduce the company’s debt by $41 million. In addition, the balance sheet and liquidity must be strengthened in order to continue operational mining even in the ongoing bear market.
Been struggling for months
While crypto financial service providers and trading venues have come under close scrutiny since the FTX crash, vultures have been circling many mining companies for months. Because in addition to falling cryptocurrency prices, they also have to contend with a massive increase in energy costs. Argo Blockchain had therefore already sent an SOS in October (reports DER AKTIONÄR).
The company’s shares thus massively accelerated their descent again and were recently traded in Frankfurt at prices of just three cents, down 97% from the beginning of the year.
News of the deal with Galaxy Digital briefly catapulted the price up to 10 cents on Thursday. About an hour before home exchange trading begins in New York, it’s still about 125% higher at about eight cents.
ARGO BLOCKCHAIN PLC REGISTERED SHARES LS -.001
(WKN: A2JR3A)
While Argo Blockchain has for now averted imminent insolvency given the massive losses of the past few months, today’s jump in prices is just a drop in the ocean. Investors who have been there for more than six months are still sitting at a near-total loss.
To get back on its feet operationally and financially, Argo depends on a sustainable turnaround in the cryptocurrency market – and that is not yet in sight in the short to medium term. Investors therefore continue to avoid cryptocurrencies.
Notes on conflicts of interest:
The managing director and majority owner of the publisher Börsenmedien AG, Bernd Förtsch, has taken direct and indirect positions on the following financial instruments mentioned in the publication or related derivatives that could benefit from any price development resulting from the publication: Bitcoin, Galaxy Digital Participations.
The editor-in-chief of Börsenmedien AG, Mr. Leon Müller, has taken direct and indirect positions on the following financial instruments mentioned in the publication or related derivatives that may benefit from any price development resulting from the publication: Bitcoin.
The author holds direct positions in the following financial instruments mentioned in the publication or related derivatives that may benefit from any price movement resulting from the publication: Bitcoin.
