Argo Blockchain Share Price Doubled Today! Why?

While the holidays may be a quiet time for many people, there are obviously some who have been working hard. Leaders at crypto miners Argo Blockchain (LSE: ARB) has apparently been closing in on a major deal. An announcement to the stock market this morning saw Argo Blockchain stock more than double in early trading.

However, this still means that the shares are down more than 90% in a one-year time frame. So what has caused the share price to rise – and does it affect what I want to do with my own shareholding in Argo?

Big financial news

The company announced that it has entered into an agreement with a Canadian firm Galaxy Digital Holdings. Under it, Argo’s flagship data center in Texas will be sold for around £54m. The agreement will also involve an Argo subsidiary refinancing its asset-backed loans. The transactions are expected to close today.

Between the sale and the loan, the move will allow Argo to pay off around £71m of debt and fees. Despite the sale of the facility, Argo will continue to operate its crypto mining machines there for at least the next couple of years.

The company plans to refocus on the Canadian market with renewed vigor. It has two data centers there.

Short-term problem solved

In the short term, I see this as positive news for the investment case. I think that explains today’s rise in the Argo Blockchain share price. It will reduce the company’s net debt by around £34 million. However, it is not yet clear to me how indebted Argo will remain after the deal.

As investors may have rediscovered playing the Monopoly board game during the Christmas holidays, selling real estate can be a quick way to raise money. But it can also make things tougher financially down the road.

While owning the Texas facility was not central to Argo’s business model, in my view, and leasing it could work well, the sale raises some concerns for me as an investor.

First, the plant is relatively new, and selling it seems like a strategy on the way. This suggests that management may make business decisions in a tactical rather than strategic manner.

Second, flogging a flagship asset is often a move used when a business is fighting for its survival. This is better than bankruptcy, which I have seen as a risk for Argo due to lower crypto prices. But the company now seems like a business in survival mode. This is not the type of situation I usually like to invest in.

Rising share price

My shares remain well below the level I bought them at. In fact, since my holdings are so small, I haven’t bothered selling them, as the selling process would likely be bogged down in trading fees.

The recent price jump gives me a better selling price and I am considering doing so in the coming days. While today’s announcement shows that management is proactively addressing Argo’s challenges, it feels like a business on the ropes. So the risk is too high for my comfort level.