Avoid Argo Blockchain shares, buy these Bitcoin mining stocks instead

July 20, 2023 07:25 AM PDT | By Invezz

Avoid Argo Blockchain shares, buy these Bitcoin mining stocks instead — Image source: Invezz

Argo Blockchain shares have underperformed

In contrast, Argo Blockchain share price has underperformed the market. It has erased all gains made this year and is now trading at the same level where it was in January. In all, the stock has plunged by over 42% from its highest point this year.

The current phase of the decline happened when the company unveiled plans to dilute its shareholders. In a statement, the company said that it was raising 5.7 million pounds by selling new shares.

It plans to use these new funds to reduce its debt and fund its expansion. It had over 57 million pounds in debt. A capital raise by selling shares is seen as the opposite of share repurchases since it dilutes existing investors.

It is common for highly leveraged companies to raise capital by selling new shares when their stocks surge. The challenge for Argo Blockchain is that it diluted its shareholders at a time when the company is underperforming the market.

Argo Blockchain vs RIOT, MARA, Cipher

Alternatives to Argo Blockchain

Therefore, I believe that investors should avoid buying Argo Blockchain shares for two main reasons. First, the company is still burning cash, as evidenced by its recent results. It had a net loss of over 194 million pounds this year. As such, it will take a longer period to recover.

Second, the company has underperformed the market in a period when cryptocurrencies have jumped. Therefore, it will likely do worse if the prices of Bitcoin and other cryptocurrencies retreats. As you recall, Argo Blockchain narrowly avoided bankruptcy in December by selling assets and raising cash from Mike Novogratz

Instead of buying Argo Blockchain shares, I recommend focusing on Bitcoin mining stocks that are doing well. This includes companies like Marathon Digital, Riot Platforms, Hut 8 Mining, and Cipher Mining. These are the best stocks to ride the momentum. Alternatively, you can buy Bitcoin itself if you believe that the cryptocurrencies industry will recover. Historically, mining stocks do well when Bitcoin is rising.

The post Avoid Argo Blockchain shares, buy these Bitcoin mining stocks instead appeared first on Invezz.

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