Shares in Argo Blockchain (LSE: ARB) have certainly been volatile lately. They’ve shed around a quarter of their value this week alone, although over the past year the Argo Blockchain share price is still up around 2,325%.
Is the recent share price fall a buying opportunity for my portfolio?
Why the Argo Blockchain share price has been falling
First let’s look at why the ARB share price has been heading south. One reason is the company’s plan to add a new listing in the US. Admittedly, this could be helpful in accessing new funding. I also see a logic for it, given the company’s ambitious expansion plans in North America. Being able to tap local markets to fund those makes sense.
But investors seem to be concerned that the American listing could lead to dilution. Each share will represent a smaller stake than before in the overall company.
But the bigger issue, as usual with Argo, may simply be swings in the Bitcoin price. The cryptocurrency has shed value this week. Due to its own Bitcoin holdings, any change in the price of Bitcoin often shows through in the Argo Blockchain share price too.
Argo’s performance continues to impress
Whatever the Argo Blockchain share price movement, the company’s performance continues to look strong to me.
Last month, it mined 206 Bitcoin (or equivalent). That’s a slight drop from the 225 it managed in July, but still a sizeable amount that shows how the company’s mining efforts have stepped up. At the end of August it held 1,659 Bitcoin (or equivalent). But the company isn’t simply stockpiling its crypto assets to no end. Last month, due in part to what it described as positive market conditions, the company generated cash of £2.1m by selling Bitcoin.
Compared to a year ago, the business looks in good shape to me. Its mining capacity continues to grow dramatically and its average monthly mining margin hit 86% last month. The US listing could help attract more attention to the company, as well as funds for expansion. I see all of that as positive for Argo’s continued business growth.
Argo share price risks
Despite that, even the recent price fall doesn’t tempt me to add Argo to my portfolio. Why not?
First, there’s the role of the Bitcoin price. The Argo Blockchain share price often moves in response to shifts in Bitcoin valuation, but the company has no control over that. So to me, buying Argo is like stepping into a carriage pulled by a riderless horse. No matter how good Argo company management may be, Bitcoin valuation is outside its control.
Second, I continue to see the company’s business model as somewhat speculative. Part of the business is about renting out mining capacity. But the key driver of investor enthusiasm for Argo is its own mining operations. At its heart, Argo is a punt on Bitcoin and crypto pricing. That’s too speculative a business model for my risk tolerance, so I won’t be adding the shares to my portfolio.