Wall Street is increasingly concerned about the future of bitcoin miner Argo Blockchain. Two sell-side analysts downgraded their stock ratings this week as the London-based company faces liquidity issues during a bear market that is crushing the industry.
Argo Blockchain said Monday a deal to sell $27 million of equity to fund operations had fallen through. The miner, which has been hit by low bitcoin prices and high energy costs because it doesn't have a fixed-rate electricity agreement, said it might soon have negative cash flow. That means it may be spending more than it receives on a regular basis.
Investment bank Canaccord Genuity cut its rating to hold from buy, and lowered its target for the company's American Depositary Shares (ARBK) to $1 from $10. Jefferies also downgraded the company to hold from buy, and lowered the price target to $1.10 from $13. Each ADS represents 10 ordinary shares.
"If indeed it can secure the financing to negotiate a power purchase agreement [PPA], we believe Argo's flagship Helios facility could be better monetized," Canaccord analyst Joseph Vafi told clients in a research note. "But given current macro uncertainty and until Argo can get to the other side of where it is now, we are downgrading shares to hold," Vafi wrote.
Meanwhile, Jefferies analyst Jonathan Petersen said that "locking in a PPA is the most important next step for ARBK and would likely act as a positive catalyst for the stock." In addition, Argo being able to lower its debt load would add "significant flexibility in these volatile times," Petersen said in a note to clients.
Argo (ARB) shares on the London Stock Exchange started plunging in early October, when the firm announced a set of strategic actions, including the sale of bitcoin mining rigs, to fulfill its obligations and execute its strategy. DA Davidson's Chris Brendler downgraded the stock to neutral in late October, along with Core Scientific (CORZ), which has also warned it is at risk of bankruptcy.
The miners' stock is down about 80% since Oct. 6 to 7.25 British pence (83 U.S. cents). The ADSs were recently trading at 91 cents.