Faces class action lawsuit over IPO
Investors in UK-based listed crypto asset (virtual currency) mining company Argo Blockchain filed a class action lawsuit against the company on the 26th.
At the time of Argo’s September 2021 IPO, the documents filed contained “untruthful, false or misleading statements” and were not prepared according to the regulations. For this reason, it continued that the following points were not properly disclosed.
- Argo’s business is highly susceptible to capital constraints, power and other costs, and network failures;
- The above impacts hindered Algo’s Bitcoin (BTC) mining capabilities, execution of business strategies, etc.
Plaintiffs allege that as a result of these undisclosed issues, “Algo has not been able to sufficiently mine bitcoin,” and that Algo’s business has been less sustainable and financially less viable than it had described to its investors. was too big, he continues.
What is an IPO
An abbreviation for IPO (Initial Public Offering), a new listing on the securities market to raise funds through the issuance of shares. Issue shares before listing and get investment in legal currency. After that, it can be listed only after it meets the IPO standards required by the exchange and the preparations for the IPO. In addition, it is easy to aim to gain profits by selling stocks that were bought at a bargain price before listing after listing.
Relation: How much selling pressure will Bitcoin miners have in 2023? Analyzed by Galaxy Digital
Argo raised about 14.6 billion yen ($112.5 million) in its September 2021 IPO, offering 7.5 million shares at a price of about 1,900 yen ($15) per share.
Argo shares are currently trading at about 247 yen (about $1.9), down about 90% since the day of the IPO. However, it has recovered from its recent low of about 49 yen ($0.38) on December 16th.
Plaintiffs allege that plaintiffs and other litigants suffered significant losses and damages as a result of Argo’s fraudulent conduct and stock price plunge. It is in the form of demanding damages and other court costs from Argo.
Since June 2022, Argo has reported operational difficulties in stages. In June, it announced that the mining volume in May had decreased by about 25% due to rising electricity prices and increasing mining difficulty.
In October, with the aim of securing working capital, along with cost reductions, etc., we are reorganizing equipment financing contracts, and we are refraining from mining when electricity prices are high at some facilities. report. Plaintiffs point out that Argo’s stock price fell after these reports.
Financial Strengthening through Transaction with Galaxy Digital
Argo sold some US facilities to Galaxy Digital at the end of December for about 8.4 billion yen ($65 million). It also restructured its loans by signing a new asset-backed loan of about 4.5 billion yen ($35 million) with Galaxy. Argo says:
The transaction with Galaxy Digital will reduce total debt by approximately 5.3 billion yen ($41 million) and simplify the management structure.
The transaction will strengthen Argo’s balance sheet, improve liquidity and enable business continuity.
As of the end of October last year, he also mentioned that if he could not raise funds, he would downsize or close the business, but he explained that he could continue the business for the time being.
Mining companies with bright and dark sides
Argo is not the only cryptocurrency mining company in trouble. From 2022, the profits of mining companies will be squeezed by a combination of factors such as the slump in the cryptocurrency market and soaring electricity bills.
Luxor Mining, a cryptocurrency mining company, announced in December last year that the total debt of various mining companies was over 540 billion yen as of the end of September last year.
Relation: Debts of virtual currency mining companies total over 500 billion yen
On the other hand, some companies are doing relatively well so far. HIVE Blockchain Technologies, a listed virtual currency mining company, has been highly evaluated for introducing its own mining machine equipped with an Intel processor, and at the time of writing, its stock price has more than doubled since the end of December.
Relation: Hive to increase efficiency with its own mining machine Share price soars 35%
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