Argo Blockchain (LSE: ARB) spiked a little in late July, presumably in response to an uptick in the Bitcoin share price. But as the cryptocurrency continued on up into August, the ARB share price did not follow. Instead, it’s been declining gently. First-half results, delivered on 9 August, did nothing to halt the downward trend.
Revenue rose 180%, and EBITDA soared 332%. To put that into perspective though, EBITDA reached just £16m. That’s nothing to sneer at. But for a company with a market capitalisation of around £480m, it doesn’t scream ‘buy’ to me.
The number of coins mined fell by around half. For the six months to June 2021, ARB mined 883 Bitcoin and Bitcoin Equivalent (BTC). But in the same period in 2020, it mined 1,669 BTC. How come? It’s all down to a ‘Bitcoin halving’ that happened in May 2020.
When a firm like Argo Blockchain mines Bitcoin, what it’s actually doing is processing transactions and adding new transaction blocks to the Bitcoin blockchain. For doing that, it receives Bitcoin as a reward. But since the start, the reward has been halving for every 210,000 new blocks mined. That happens approximately every four years, and will continue until the total supply of Bitcoin reaches its maximum of 21 million.
ARB share price weakness
Against that, the Bitcoin price is way higher now than it was a year ago, so ARB has been able to grow its revenues. Why, then, has the ARB share price faltered?
There’s a more serious concern right now, in the form of a very negative report published by short seller Boatman Capital. My Motley Fool colleague Edward Sheldon has dug into the report, released on the same day as the company’s H1 results. I won’t repeat the details. But to summarise, it’s all about a land deal in Texas, where the company is building its new facility.
Boatman said: “We believe that Argo Blockchain purchased land in Texas seemingly for up to 100 times more than the acreage is worth, raising serious governance questions about why this deal was done and who benefited.“
There’s also a legal dispute between Argo and Celsius Network, which seems to have gone beneath the radar.
Buying opportunity?
So, against the background of all this, does the relatively low ARB share price make me want to buy now? Well, the company did say it has increased its mining capacity by more than 50%. And the new Texas facility should raise that even higher (pending any adverse outcome from the land deal issue). And even when Bitcoin mining itself comes to an end, there are plenty of other cryptocurrencies to move on to.
The valuation does look a bit high, with the company currently worth around 8.7 times the value of its crypto holdings. But, I definitely do see potential for the shares to reverse their recent weakness and put in a new bull run. Right now, though, the Boatman report puts any such thoughts on hold. I’ll wait and see what the outcome is.
Disclaimer: 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.