I wrote about Argo Blockchain (LSE: ARB) just last week, but the company released further announcements a few days ago. So given the recent news released on Monday, I thought the shares deserved another look. I don’t think frequently reviewing the investment case for a stock is such a bad thing. I reckon it makes me a better investor. For now, I’m still bullish on Argo Blockchain shares as a long-term investor.
Here I consider the the two key announcements released by the company earlier this week.
#1 – Land purchase
I have previously commented on Argo Blockchain’s intention of buying land in Texas, US. The purpose of this potential acquisition is to build a new mining facility in the next 12 months.
Well on Monday, Argo Blockchain confirmed that the purchased of 320 acres of land in the western part of the state has completed. The company also highlighted that it will use renewable energy to power the mining facility. I like the fact that it’s using green energy from the start. I reckon this will place Argo Blockchain shares on the radar for sustainable investors.
To me this is a key milestone for the company. It boosts Argo Blockchain’s infrastructure so that it can become a bigger player as a cryptocurrency miner. I think it gives the company better control over its mining operations. This means it could have a competitive edge compared to its peers.
The fact that it’s using renewable energy means that its costs could be lower. To me, this screams out the potential of higher margins and better profitability going forward.
#2 – Fundraising
The cryptocurrency miner also announced on Monday that it has successfully raised £27m through a share placing. The funds will be used for several thing including capital investment and pursuing strategic opportunities in the cryptocurrency space.
The key thing that stood out to me is that approximately £8m of the fundraising is being used as a top-up investment in another cryptocurrency firm, Pluto Digital Assets. Argo Blockchain’s initial stake was a 25% investment. Pluto is clearly raising money, so in order for Argo Blockchain to maintain its shareholding, it needed to provide follow-up capital.
This makes sense to me. I like that Argo Blockchain is diversifying its mining capabilities by investing in early stage companies. This will take sometime to bear fruit, but I believe it’s taking steps in the right direction.
The risks
I know that Argo Blockchain shares can be volatile as they are linked to the price of Bitcoin, which can rise as well as fall. Because of this, I’d only invest what I could afford to lose. In fact the UK financial regulator, the Financial Conduct Authority (FCA) has warned investors against cryptocurrencies.
I should emphasise that Argo Blockchain is still a small company and is undergoing heavy investment to boost its infrastructure. As a result, I’d expect this to weigh on profitability and possibly the share price.
I recognise that the cryptocurrency miner has a long way to go. It will also be a bumpy ride. But I think the company is taking the right steps, as seen in its recent announcements.