Argo Blockchain has survived the downturn in the cryptocurrency market and headed off a shareholder rebellion to pivot to become a business-to-business provider of mining services.
It initially set itself up as a mining as a service (MaaS) specialist and successfully sold mining subscriptions to the general public - until the aforementioned shifting of the tectonic plates of the crypto sector.
Crypto mining explained
For the uninitiated, miners create virtual currencies such as Bitcoin and Ethereum. The process involves using complex maths to validate new transactions. This requires significant and expensive processing power that is costly to run. By creating a computing hub at scale in Quebec, Canada, run from cheap, sustainable power, Argo hoped to throw the process open to individual ‘hobby’ miners.
Argo saga ends; business transformed
The second week of May proved a transformational one for Argo. In a matter of days ahead of what looked likely to be an incendiary investor meeting, the company was able not only to plot a change of direction, but also begin to enact it.
Central to the drama was dissident shareholder First Investments, run by the colourful entrepreneur Frank Timis. It went from villain to hero in a hectic couple of days. Weeks earlier it requisitioned a meeting to oust the board. But on the eve of the showdown it became Argo's first and potentially largest enterprise-level mining-as-a-service customer, ploughing in up to US$1mln a month.
Investors abuzz over HIVE deal
Days earlier, Argo scored something of a coup as it unveiled a strategic co-operation deal that valued its shares well in excess of the current market price.
The headline value of the deal with HIVE Blockchain Technologies was £5.1mln and involved a share swap that gave the Vancouver group a 15% stake in Argo. In return the AIM-listed firm got 5% of HIVE. The standout detail was the effective price paid by the Canadians – 11.6p a share, or a 231% premium to the last closing share price.
HIVE is one of the world’s leading crypto-mining companies, with state-of-the-art mining facilities in Iceland, Sweden and Norway. The company is listed on the TSX Venture Exchange in Toronto with a market value of around C$180mln. It generated US$35.2mln in mining income last year.
Argo chairman Jonathan Bixby said: “This deal makes strategic sense and demonstrates the intrinsic value of our business, our vision and existing investment. The alliance is transformational for Argo and will deliver further long-term and sustainable fiat-based revenue streams for the company.”
Bixby agreed to step down as chairman to be replaced by fellow founder Mike Edwards. The company also said it would choose a new independent director with input from First Investments.
The company expects to be at operating cash break-even during May. Its cash position as at the end of last year was £16mln.