After Helio’s Sales Update, Argo Blockchain Analyst Remains Sidelined – Argo Blockchain (NASDAQ:ARBK)
HC Wainwright analyst Kevin Dede maintained a Hold rating on Argo Blockchain Plc ARBK, given the uncertainty of Argo’s outlook. Yesterday, Argo Blockchain announced the sale of its Helios facility, an 800MW ERCOT grid connection housing a 200MW submersible bitcoin mining facility that has only been operational since May 2022.
The deal includes the elimination of all current Argo debt, Dede measured at $143 million at the end of the June quarter, in exchange for a $65 million value for the facility and a secured loan of $35 million bitcoin mining equipment from the buyer, Galaxy Digital Holdings Ltd BRPHF.
For Galaxy, the purchase provides an opportunity to secure a brand new immersion in bitcoin mining facilities that reduces reliance on external hosting arrangements while providing a runway for mining expansion.
Argos case is a bit more cut and dry. The agreement preserves the company’s current operating structure, eases the debt burden and prevents the filing of bankruptcy.
Furthermore, Argo’s fleet of 23,619 Bitmain S19J Pro machines, generating 2.36 Eh/s, continue to run with minimal disruption in Dickens County, Texas, the facility that until the recent mining downturn had been the heart of Argo’s ambitions.
Argo also intends to concentrate its business efforts on its two Quebec facilities which generate 140 Ph/s of bitcoin and an unknown amount of Zcash mining under a total of 20MW of low-cost hydropower – Argo’s total bitcoin hash rate stands at 2.5 Eh/s .
In its bitcoin mining operation, Galaxy has hugely competent personnel under Amanda Fabiano, a long-time, highly respected crypto thought leader.
Given that the 40 employees currently at Helios are slated to remain in their positions, Dede had reasonable confidence that Helios’ productivity would stabilize and improve once Galaxy establishes a PPA with a Texas power supplier.
Argo painted a clear balance sheet picture when the agreement is over. Argo’s debt obligations with NYDIG should be fulfilled through the conclusion of the Helios sale.
And while Argo’s balance sheet view is now more precise, the company’s profit and loss account remains far less transparent.
Argo has not disclosed its hosting costs, which Dede suspects remain variable since Galaxy does not yet have a PPA in place for the Helios facility, nor does the analyst have insight into the new debt costs.
Argo said it also has room to expand its two Quebec facilities. Dede had not visited either, but had spent a day at Helios. Based on this experience, Dede expects Argo’s Canadian operations to meet sophisticated industrial standards.
With a narrow view of the Argos P/L and no September quarter numbers filed at this point, Dede remains more comfortable on the sidelines.
Once figures for September are released and the company can provide a baseline for hosting cost calculations, Dede intends to return to the investment assessment.
Price action: ARBK shares traded down 15.80% at $0.85 as of last check on Thursday.
