The Argo Blockchain (LSE: ARB) share price has endured a torrid time over the past year. It’s fallen around 30% in value since this point in 2021 and was recently sitting at less than 83p. Its descent inside penny stock territory leaves it trading at a whopping 71% discount to last February’s record closing high of 284p.
Low-cost stocks like Argo Blockchain (and especially penny stocks) are well known for their volatility. So it’s possible that more choppiness could be around the corner. But as a long-term investor and a bargain lover, should I be paying the cryptocurrency miner close attention following its heavy fall?
On the plus side
Any decision on investing in Argo Blockchain is linked closely to the outlook for Bitcoin prices. Fans of these new-age assets will argue that they will have an important role to play in an increasingly-digitalised world. It’s possible that widespread adoption could be just around the corner.
Over the past year, Argo’s made huge strides to capitalise on this opportunity. It started construction on a 200MW crypto mining facility in Texas which will allow it to turbocharge capacity at low cost. It also agreed to acquire 20,000 Bitcoin mining machines for delivery between the second and third quarters of 2022.
Latest news released last week showed that building remains on course for completion during the first half of the year. Yet Argo Blockchain’s ever-sinking share price shows that the firm’s steady progress isn’t cutting it with investors. Why?
Reasons for worry
Well, first off, the sinking Bitcoin price hasn’t done Argo Blockchain’s share price any favours. Late last week, it slipped to its cheapest since September, to around $41,000 a coin, on fears over Federal Reserve monetary tightening and political unrest in the key mining territory of Kazakhstan.
However, the scale of Argo’s slump is chiefly down to other factors. The business has issued shares and taken on debt over the past year to fund its ambitious growth plans. And market makers worry about the prospect of additional share placings that could dilute shareholders’ interest even further.
Concerns over the way Argo is run have also shaken investor confidence big time. A slew of reports from short-seller Boatman Capital have done little to improve the mood either.
It’s identified a number of causes for alarm, including the firm taking on expensive debt obligations and tapping shareholders while it has cash on the balance sheet. Meanwhile, the business paying £17.5m to secure land for its Texas facility, more than 100 times what Boatman alleges it is actually worth. And finally, Argo is enduring a constant outflow of key decision makers (four of its five directors passed through the exit door in 2021).
I’d buy other growth shares today
It’s possible that Argo could prove to be an exceptional long-term investment. But I’m afraid there is too much noise surrounding the crypto company to encourage me to buy in.
The unpredictable outlook for Bitcoin prices is another reason why I’m happy to sit on the sidelines. I’d much rather buy other UK shares. After all, there’s no shortage of bright growth shares for me to choose from today.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.