It has been a rotten time to own shares in Argo Blockchain (LSE: ARB). The Argo Blockchain share price has crashed 88% in the past year. It now trades as a penny share.
The chart is not pretty — not only has the price fallen recently, it has been on a downward trend for much of the 12 months.
So, will the price drift even lower or could it start to regain ground? As an Argo Blockchain shareholder myself, this is not just a theoretical question. I need to decide whether to sell at a loss or hang on hoping for an improvement in the share price.
Changed times
Argo was riding high for parts of last year, when crypto prices were more robust and the broader economy seemed less fragile than it does now.
But the US dollar value of Bitcoin has tumbled 69% last year (the pound value has fallen by 61%). A lot of tech-related shares saw heavy price falls in the final months of 2021 and have yet to recover their old levels.
That matters for Argo because optimism about tech and a strong crypto price helped support its share price. As a crypto miner, lower prices for Bitcoin and its peers equate to smaller profits for Argo — or none at all.
Business challenges ahead
That environment is reflected in some of the challenges that the company is currently facing.
This month it announced plans to sell thousands of unused mining machines and raise capital by issuing new shares. That will dilute existing shareholders. I see a risk that in order to boost liquidity further in future, shareholders could be diluted again.
Part of the justification for this move was to “ensure that the Company has the working capital necessary to. . . meet its obligations over the next twelve months.” Although the company is working to stay viable, the language used seems ominous to me. Apparently the board is concerned that some tough medicine is needed just to meet the firm’s short-term obligations.
Grounds for optimism
However, all is not lost.
The company has proven it can make a mining profit. That could be the foundation for future profits. Just as a fall in crypto prices has hurt the Argo Blockchain share price, any future increase might help it.
Argo also has a number of data centres I think could be used to earn revenue even if not by mining crypto. Demand for data centre space remains high and I expect that to continue.
Where next for the Argo Blockchain share price?
Despite that, the company clearly faces challenges. Its recent moves are prudent but shoring up the balance sheet in that way may further hurt investor sentiment. Indeed, since the announcement, the Argo Blockchain share price has moved downwards.
With positive news and higher crypto prices, the price could recover in future. But I think there is a real risk it could end up going to zero. Even if it does recover, I do not expect that to happen any time soon.
For now I still hold my shares. But if the outlook does not improve in coming months, I will consider selling them.