Mining firm shares soar 120% as company battles bankruptcy

Shares in beleaguered crypto mining firm Argo Blockchain soared 120% in London following a sale and refinancing agreement with Galaxy Digital Holdings.

argo stock increased to about $1 As investors welcomed news of a $35 million refinancing arrangement and a $65 million data center sale to Galaxy. The company’s stock fell 92% in 2022.

The Argo outwits the Grim Reaper, but only justly

This $100 million lifeline comes two weeks after the firm told The London Stock Exchange that it was in talks to sell some assets and take out a loan against its mining equipment to help revive its balance sheet.

The clock was ticking on a possible bankruptcy filing after Argo announced in October 2022 that a $27 million fundraising attempt from a “strategic investor” had failed. Despite raising $5.6 million from the sale of 3,843 Bitmain mining computers, Argo warned that failure to secure additional financing would result in negative cash flow. Then it will be unable to continue working at full capacity. In the worst case it will stop operating.

The sale of its $65 million facility means that Argo’s focus will shift to its water-powered facilities in Canada.

Bear market amplifies bankruptcy risk

While it seems that Argo has escaped the falling knife, rising electricity prices and BitcoinThe decline from the all-time high in 2021 has reduced the cash flow of many mining companies in 2022, leaving them unable to service debt. Companies acquired high levels of leveraged loans during the last crypto bull market.

hashrate index pegs Public crypto mining firms have liabilities of around $4 billion. 25 miners have a debt-to-equity ratio of around 1.8, which is considered high for the risky bitcoin mining industry.

Mining companies like Argo Blockchain help secure the bitcoin network by acting as a decentralized clearinghouse for bitcoin transactions. They use powerful computers to compete to solve a mathematical puzzle and broadcast a block of transactions to the bitcoin network.

Core Scientific, one of the largest public miners, filed for Chapter 11 bankruptcy After last month it could not make millions in monthly payments to service its $1.3 billion debt. A voluntary bankruptcy filing buys breathing space for bankrupt companies to restructure their debt obligations while attempting to turn a profit. In extreme cases, a company will be liquidated.

Previously one of the largest hosting companies in the US, calculate answer Filed for bankruptcy in September 2022. later it filed 363 Bankruptcy Sale To destroy his property in order to repay the loan.

Other notable firms such as Hosting Company Greenidge Bankruptcy is avoided by allowing lenders to assume ownership of the mining equipment.

While Marathon Digital has $851 million in liabilities, it is unlikely to file for bankruptcy as its liabilities include convertible notes that do not put pressure on the company’s monthly revenue.

However, Hashrate Index says that unsustainable debt in the mining industry will result in further capitalization and restructuring.

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disclaimer

BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.

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