Key points:
- Argo Blockchain was downgraded by various analysts after this week's announcement
- Jefferies said the company faced a “perfect storm of headwinds”
- Iris Energy said some of its mining equipment isn't producing enough cash
Following news that Bitcoin mining company Argo Blockchain's (LON: ARB) future remains uncertain following the collapse of a funding deal, various analysts moved to downgrade the stock this week.
Argo told investors on Monday that its plans to raise £24 million ($27 million) via a subscription for ordinary shares seemingly failed to go through, and as a result, it is exploring other financing opportunities, although there can be no assurance that any agreements will be signed. As a result, the company said if it is unsuccessful, it would “become cash flow negative in the near term and would need to curtail or cease operations.”
Following the news, Jefferies analyst Jonathan Petersen downgraded Argo Blockchain to Hold from Buy, cutting the firm's price target on the stock to $1.10, down from $13, citing a “perfect storm of headwinds” including sustained high power costs, a sustained low BTC price, and a rising network hash rate.
Also Read: Can Ethereum and Bitcoin Solve Their Energy Use Problem
Given those headwinds, there is also pressure on other miners.
According to an article from CoinDesk on October 21, one Wall Street analyst said he was pulling the plug on Bitcoin miners due to the bear market woes.
DA Davison analyst Chris Brendler said in a note at the time that he was downgrading shares of Core Scientific and Argo Blockchain due to the crypto winter, stating it continues to weigh heavily on the profitability of the miners.
“Persistent inflation and rising pessimism around interest rates have pushed back the eagerly anticipated [Federal Reserve interest rate] pivot and it's now clear that less advantaged miners are already starting to run out of time,” Brendler explained, adding that he is still positive on Bitcoin’s long-term potential, but he was “pulling the plug” for now.
Meanwhile, Bloomberg said this week that Sydney-based Iris Energy Ltd is the latest miner to grapple with debt trouble due to the sharp market downturn for digital assets. The company's shares fell 15% on Wednesday and a further 10% on Thursday after it said in a filing that some of its Bitcoin mining equipment isn't currently producing enough cash flow to cover their respective debt financing obligations.
In addition, they said the equipment has a current market value “well below the principal amount of the relevant loans,” and restructuring discussions with the lender remain ongoing.
