United States securities and exchange commission logo
June 21, 2021
Peter Wall
Chief Executive Officer
Argo Blockchain Plc
Room 4, 1st Floor
50 Jermyn Street
London SW1Y 6LX
England
Re: Argo Blockchain Plc
Draft Registration
Statement on Form F-1
Submitted May 20,
2021
CIK: 0001841675
Dear Mr. Wall:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form F-1
Prospectus Summary, page 1
1. You disclose that your
fleet of mining machines can generate more than 1,075 petahash
per second. Please
revise to indicate the portion of this capacity that is housed in your
owned facilities versus
hosted facilities as you disclose on page 69. This additional
information will
provide context to the disclosure noted here regarding the megawatts
represented or used at
the two types of facilities.
Peter Wall
FirstName LastNamePeter Wall
Argo Blockchain Plc
Comapany
June NameArgo Blockchain Plc
21, 2021
June 21,
Page 2 2021 Page 2
FirstName LastName
2. You describe yourself as the a leading blockchain technology
company focused on large-
scale mining of Bitcoin and other cryptocurrencies. Please provide
the basis for your
characterization of your Bitcoin mining operations. For example, it is
not clear whether
you are basing this on objective criteria such as market share based
on revenues or number
of Bitcoin mined or hash power.
3. We note your disclosure that you are planning to invest in the wider
cryptocurrency and
blockchain sectors. Please tell us whether your strategy includes
participation in Initial
Coin Offerings, conducting an Initial Coin Offering, or operating as
an exchange. As part
of your discussion, please disclose whether you have a policy for
evaluating the digital
assets in your portfolio or those that you may acquire, in terms of
whether they may
constitute a security.
Our Strategy, page 2
4. We note that you intend to invest heavily in vertical integration.
Please revise to clarify
what vertical integration represents in this context.
Risks Associated with Our Business, page 2
5. We note that the deposit agreement contains both a jury trial waiver
provision and an
exclusive forum provision. Please include disclosure regarding those
provisions in your
summary risk factors.
Summary Historical Consolidated Financial and Other Data, page 9
6. Revise to reconcile your Non-IFRS EBITDA measure to the most directly
comparable
IFRS measure of net income. Refer to Question 103.02 of the Non-GAAP
Compliance
Disclosure Interpretations.
Management's Discussion and Analysis of Financial Condition and Operating
Performance
Factors Affecting Our Performance, page 70
7. We note your disclosures regarding reward rates for cryptocurrencies,
which are subject to
adjustments at predetermined intervals, such as halving the reward
rates for Bitcoin.
Please expand this disclosure to include the current Bitcoin currency
reward rate as well
as the previous rate, as noted on page 32, to add context to this
discussion.
Cost and Source of Power, page 71
8. You disclose that you "expect to obtain more than 90% of our power
requirements from
reliable renewable power sources at less than the current cost of
fossil fuel energies in
other locations." Please revise to clarify why you believe the cost of
power from
renewable resources will be lower than from fossil fuels and whether
you have any
agreements for the supply of power to your Helios mining facility.
Peter Wall
FirstName LastNamePeter Wall
Argo Blockchain Plc
Comapany
June NameArgo Blockchain Plc
21, 2021
June 21,
Page 3 2021 Page 3
FirstName LastName
Key Indicators of Performance and Financial Condition, page 71
9. Your measures of Bitcoin and Bitcoin equivalent mining margin and
Average Direct Cost
per Bitcoin appear to be Non-IFRS measures that exclude normal,
recurring, operating
expenses included in gross profit on the statement of comprehensive
income, such as
depreciation of mining equipment, change in fair value of digital
currencies and realized
loss on the sale of digital currencies. Please tell us how you
considered whether the
exclusion of such adjustments creates a tailored accounting principal
and revise your
disclosures as necessary. Refer to Question 100.04 of the Non-GAAP
C&DIs.
10. Notwithstanding the comment above, please revise to label these
measures as Non-IFRS,
include a discussion of why management believes these measures are
useful and provide a
reconciliation of the calculation for these measures to the most
directly comparable IFRS
measure. For example, you should present IFRS gross profit and the
related IFRS mining
margin and reconcile to non-IFRS gross profit and the related non-IFRS
mining margin.
Also, ensure you present the IFRS measures with greater prominence
throughout the
filing. Refer to Item 10(e)(1)(i) of Regulation S-K and Question
102.10 of the Non-
GAAP C&DIs.
11. We note that you use Bitcoin Equivalents as a key indicator. Please
revise to clarify the
percentage of revenue attributable to mining coins other than Bitcoin
such as ZCash or
other equihash based proof-of-work coins. In this regard, we note that
rewards earned
through the Luxor mining pool are converted to Bitcoin, but it is
unclear whether you
mine other coins for your own account.
Results of Operations, page 74
12. Please revise to include a discussion of the material factors that
contributed to the
difference in your effective income tax rate and the statutory income
tax rate in each
period presented. Also, clarify whether you expect such factors to
have a continuing
impact on your effective tax rate, or to the extent the current rate
may not be indicative of
future effective tax rates, revise to discuss the potential impact any
shift in such rates may
have on your future results of operations. Refer to Item 5.A of Form
20-F Section III.B.3
of SEC Release 33-8350.
Liquidity and Capital Resources, page 75
13. You disclose you have financed your operations primarily through cash
generated by sales
of cryptocurrencies and sales of equity securities and that your
primary sources of
liquidity include cryptocurrencies held in treasury. Please revise to
incorporate your
disclosure included elsewhere regarding your business strategy in
selling portions of
cryptocurrencies mined in exchange for fiat currency to fund your
operating expenses.
Please discuss the average period between receipt of cryptocurrency
and the subsequent
conversion to cash and discuss any risks to your liquidity caused by
volatility in
cryptocurrency pricing.
Peter Wall
FirstName LastNamePeter Wall
Argo Blockchain Plc
Comapany
June NameArgo Blockchain Plc
21, 2021
June 21,
Page 4 2021 Page 4
FirstName LastName
14. You state that you expect significantly higher capital expenditures in
2021 as you execute
your capital integration strategy. Please revise here to disclose the
amount paid to
purchase the 160 acres of land in Texas in March 2021 and the
estimated range of
expenditures you expect to incur in fiscal 2021 to build your mining
facility. Refer to Item
5.B.3 and 5.D of Form 20-F.
Mining Equipment and Supplies, page 81
15. We note your disclosure that your average failure is typically 4-5%,
with the average
being 29% during 2020. We further note your disclosure on page 31 that
your S17 fleet
had a 38% failure rate. Please revise to provide a more detailed
discussion of the failure
rate for each type of ASIC miner, whether failure renders the machine
completely
inoperable, and reconcile the disclosure relating to failure rates
among your machines. In
addition, include a discussion of any applicable warranties on the
ASIC miners you
acquire.
16. We note that you entered into an agreement to acquire ePIC mining
machines for delivery
in the fourth quarter as well as a lease agreement with Celsius
Network for the leasing of
4,500 Bitmain S19 and S-19 Pro miners. Please revise to provide the
material terms of
those agreements including the consideration paid and any termination
provisions. Define
"next generation mining machines." To the extent known, provide a
discussion regarding
the efficiency of the ePIC mining machines. Finally, file the
agreements as exhibits. Refer
to Item 601(b)(10) of Regulation S-K.
Principal Shareholders, page 102
17. Please identify the natural person or persons who directly or
indirectly exercise sole or
shared voting and/or dispositive power with respect to the common
stock held by BLOK
ETF (Toroso Asset Management). Refer to Item 403 of Regulation S-K.
Report of Independent Registered Public Accounting Firm, page F-2
18. Please revise to include the date of this report. Refer to Item
2.02(a) of Regulation S-X
and AS 3101.10d
Notes to the Financial Statements
Note 3. Significant Accounting Policies
Revenue Recognition, page F-10
19. We note that your direct costs include fees paid to mining pool
operators. Please explain
further why you pay a fee to the mining pool operator. In this regard,
tell us what this
consideration represents and how that coincides with your indication
that the mining pool
operators are your customer. Also, tell us your basis for recording
these fees as cost of
revenue and not a reduction of the transaction price. Provide the
specific guidance in IFRS
Peter Wall
Argo Blockchain Plc
June 21, 2021
Page 5
15 you relied upon and include a detailed analysis of how you applied
such guidance. In
your response, tell us the amount of such fees included in cost of
revenue for each period
presented.
Digital Currencies, page F-11
20. Please revise to clarify whether you hold digital currencies for sale
in the ordinary course
of business and whether you buy or sell digital currencies for others
or on your own
account. In addition, disclose whether your digital assets are
acquired for the purpose of
selling in the near future and generating a profit from fluctuations
in price.
21. You state on page 71 that you hold Bitcoin in treasury for the
long-term. Please clarify
for us what is meant by long-term and explain how this statement is
consistent with your
response to the above comment as well as to your disclosures elsewhere
that seem to
imply you hold digital assets for sale in the ordinary course of
business.
Financial Instruments, page F-16
22. You state that you enter into forward, option and swap contracts to
reduce exposure to
mining difficulty movements and crypto asset price risk. Please revise
to clarify whether
any of these contracts you describe were outstanding during or as of
the end of the periods
presented, and if so, where they are recorded. Also, ensure that you
disclosures comply
with IFRS 7, as applicable.
Note 23. Taxation, page F-28
23. Revise to disclose each type of deferred tax asset and liability or
clarify that the loss
carryforward is the only temporary difference. Refer to IAS 12,
paragraph 81(g).
Note 27. Post Balance Sheet Events, page F-29
24. You disclose that you signed a share purchase agreement with GPUone to
purchase two
data centers in Quebec and that the acquisition closed on May 13,
2021. Please revise to
disclose the total consideration of this acquisition, including the
portion that came from
your existing deposits with GPUone and the amount of cash
consideration. Refer to IAS
10, paragraph 21(b).
25. You refer here to a significant equity holding in Pluto Digital Assets
(Pluto). Please
revise to disclose the amount of such investment and the ownership
interest in Pluto
following this transaction. Also, tell us whether you consider this to
be a related party
FirstName LastNamePeter Wall
transaction pursuant to IAS 24 and if so, revise to indicate as such. In
this regard, we note
Comapany
yourNameArgo Blockchain
CEO, Mr. Wall, is alsoPlc
a director in Pluto.
June 21, 2021 Page 5
FirstName LastName
Peter Wall
FirstName LastNamePeter Wall
Argo Blockchain Plc
Comapany
June NameArgo Blockchain Plc
21, 2021
June 21,
Page 6 2021 Page 6
FirstName LastName
26. Please revise your disclosures with respect to your acquisition of a
hosting facility project
in West Texas to further describe the transaction, noting the parties
involved and the
form(s) and amount of consideration paid. Also, to the extent this
transaction is the same
as the DPN LLC acquisition discussed elsewhere, tell us how you
determined whether this
was the acquisition of a business and your consideration financial
information is required
pursuant to Rule 3-05 and Article 11 of Regulation S-X. Refer to
Article 11-01(d) of
Regulation S-X and Item 4.b of Form F-1.
Recent Sales of Unregistered Securities, page II-1
27. We note that the Company has issued ordinary shares to various third
parties over the past
several years. Please revise to name the persons or identify the class
of buyers to whom
the securities were sold. For guidance, please refer to Item 7 of Form
F-1 and Item 701 of
Regulation S-K.
General
28. We note your strategy includes diversifying your sources of revenue
and value creation by
investing in adjacent cryptocurrency and blockchain technology
initiatives, including
decentralized finance ( DeFi ). Please clarify the nature and
extent of your investments in
these initiatives, including your significant equity holding in
Pluto Digital Assets PLC,
and discuss, if material, any known trends and uncertainties related
to your diversification
strategy that are reasonably likely to have an effect on your
financial condition or results
of operations. Refer to Item 5.D of Form 20-F. Also, please explain
whether and how you
are addressing any risks and challenges arising from these investments
in terms of
compliance with the U.S. securities laws, particularly the Investment
Company Act of
1940.
Finally, please disclose, if true, that one of the principal purposes
of this offering is to
obtain capital for further investment in DeFi projects and other
initiatives. In this regard,
we note the reference to other incremental growth in your
discussion of the use of
proceeds from this offering, as well as the disclosure that you
recently raised significant
funds in two separate offerings for the purpose of, among other
things, investment in
blockchain/fintech ventures, including Pluto Digital Assets PLC.
Peter Wall
FirstName LastNamePeter Wall
Argo Blockchain Plc
Comapany
June NameArgo Blockchain Plc
21, 2021
June 21,
Page 7 2021 Page 7
FirstName LastName
You may contact Melissa Kindelan, Senior Staff Accountant, at (202)
551-3564 or
Kathleen Collins, Accounting Branch Chief, at (202) 551-3499 if you have
questions regarding
comments on the financial statements and related matters. Please contact
Matthew Derby, Staff
Attorney, at (202) 551-3334 or Larry Spirgel, Office Chief, at (202) 551-3815
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Martin A. Wellington