Bitcoin Mining Enterprise Argo Sees Securities Suit After Production Slows

A lawsuit filed in the Eastern District of New York has taken aim at London, England-headquartered Argo Blockchain PLC and its directors over a September 2021 initial public offering that investors claim went bust.

During and after the IPO, Argo’s Bitcoin (BTC) mining business took several nose dives that investors said were foreseeable and that the company failed to disclose in Securities and Exchange Commission (SEC) filings, thereby damaging purchasers of NASDAQ-traded Argo American Depository Shares (ADSs).

Argo’s cryptocurrency mining business is worldwide, the complaint says, noting that Argo maintains a fleet of thousands of BTC mining machines at facilities in Canada and Dickens County, Texas, the latter of which is called the “Helios” facility.

In September 2021, Argo conducted its IPO, issuing 7.5 million ADSs to the public at the price of $15 per share for approximate net proceeds of $105 million. Yet less than a year later, the shareholder contends that the company began to face significant production obstacles, each of which caused the stock price to tumble when publicized.

In June 2022, Argo announced that it had mined approximately 25% fewer BTC in May 2022 compared to April 2022 because of increased network difficulty, higher electricity prices, and the curtailment of mining operations at its Helios facility. Then, in October 2022, it announced a change to an equipment contract, its intent to sell 3,400 mining machines for £6 million, and its intent to raise approximately £24 million from a “strategic investor.”

A few days later, the company came forward with more disappointing BTC mining results from lessened operations at the Helios factory. After this news hit the market, ADS were trading at $2.19, well below their  $15 offering price.

The shareholder argues that Argo and its board kept material information from the public including that the company was “highly susceptible to and/or suffered from significant capital constraints, electricity and other costs, and network difficulties.” This impacted Argo’s ability to deliver on BTC mining goals, and showed that Argo’s business was less sustainable than believed to be and its prospects overstated.

The suit seeks damages under federal securities laws for the omissions or misstatements that caused American consumers to invest to their detriment. The plaintiff and putative nationwide class are represented by Pomerantz LLP.