Riot Platform Shares (REBELLION) are falling after Kerrisdale Capital made a call to short the company’s shares. Kerrisdale Capital CIO Sahm Adrangi joins Market Domination to explain the call.

“I think our investment thesis is that this sector simply won’t exist in five years. Bitcoin mining is one of the stupidest business models we have come across in our time of short selling,” Adrangi told Yahoo Finance. He adds that looking behind the economics of all US bitcoin miners reveals that they “don’t make money” but instead issue shares to pay themselves healthy stock compensation and buy more mining hardware.

“We disagree with the characterization of the Bitcoin mining industry and Riot, and the similarly incorrect conclusions reached in the Kerrisdale Capital report. We believe these mistakes will be demonstrated through the execution of our ambitious 2024 growth plans and resulting financial performance,” a Riot spokesperson said in response to Kerrisdale’s call.

For more expert insights and the latest market action, click here to watch this full episode of Market Domination.

This article was written by Gabriel Roy

Video transcript

And moving forward, we’re keeping an eye on Riot’s platform shares.

Shares fell about 2%, well below session lows.

The move comes after short seller Kerrisdale Capital came out with a call to guess, sell shares and also be Long Bitcoin.

So a trade from Paris joining us now is the founder of Kerrisdale Capital and Cio S Andr.

And thank you for joining us here today.

Um, tell us what your thesis is here, your Long Riot investment thesis and maybe combine that with a Bitcoin position as well or excuse me, Short Riot and then Long Bitcoin.

Yeah, I mean, I think our investment thesis is that this sector simply won’t exist in five years.

Bitcoin mining is one of the stupidest business models we have come across in our time, shorting the last 15 years or running Kalle. Basically, the barriers to entry are zero.

companies around the world can buy these A six from China.

Um Take them next to a waterfall in South America and have much cheaper access to electricity and be a lower cost producer And basically, if you look at the economics behind all the Bitcoin miners in the United States, they don’t make money, they just issue shares to pay themselves, you know, healthy stock compensation and buy more Asic and, you know, never actually generate a return.

And the whole thing is kind of a hoax and we kind of published it on Riot Today and we plan to publish more.

The story continues

Um, you know, how does this whole industry end up going to zero, some, I have a lot of questions.

First of all, if it’s just a communication, if it’s just a commodity and there’s nothing to differentiate what makes it a scam.

I mean, something could be a bad, bad business model, without being a scam that has, that has some connotations here that there’s something illicit or illegal going on.

Clear.

It’s a horrible business model.

It’s not necessarily a technical act, technically, you know, a completely fraudulent illicit action.

But, you know, I mean, that’s the worst business model you can imagine and what you see in terrible business models.

I mean, I think about cannabis companies in 2017, 2018, uh, when you’re the CEO of such a terrible business, um, there’s a lot of shady things that you do and essentially you’re just getting rich. at the expense of shareholders and that is what is happening here.

I want to read a statement that came to us via riot and this is.

Oh, come on.

We disagree with the characterization of the Bitcoin mining industry as a mutiny and the equally unsound conclusions reached in the Kerrisdale Capital report. We believe these areas will be demonstrated through the execution of our ambitious growth plans for 2024 and the resulting financial performance.

Uh What do we know about these growth plans?

And so I guess, how do you balance that with the incredible shares that have been minted, diluting shareholders to pursue your growth?

Yes.

Isn’t this absurd?

This company has already diluted shareholders by 18% this year.

I mean, I’m looking forward to that growth and illusion throughout the year.

Maybe they can dilute shareholders by 50% just this year, maybe another 50% next year.

Um, since 2020, the company has increased its stake by multiples.

Um, and this is just part of the industry-wide chorus.

I mean, when they talk about growth, they just mean spending more on Capex and buying more computers.

But you know what?

The same goes for everyone in the US and everyone around the world.

Um, and what you see is that the network cash rate just increases over time.

Every month, each of these miners, including him, receive fewer and fewer Bitcoins, even as they invest all the money they are raising from shareholders into buying more computers.

It’s basically a big hamster wheel where they take money from investors, buy more computers, and then produce less Bitcoin per share each year thereafter.

Some why if, if the entire industry is so terrible, why?

We have to start somewhere.

And then we started with turmoil.

And the other thing we haven’t talked about here is Bitcoin.

Mining is horrible for the environment.

I mean, China kicked Bitcoin miners out of their country because it’s an absurd concept.

Uh You burn all this fossil fuel to fuel speculation around an imaginary asset.

Uh That doesn’t belong within our borders.

The entire industry should be kicked out and banned to, you know, other countries that want to deal with it.

Well, I mean, it’s bad for the environment.

We all share an environment.

So if it’s bad for the environment here, it’s bad for the environment anyway, before we look outside, I want to ask about another brief call you had on microstrategy.

Likewise, this was a short microstrategy.

Long Bitcoin.

Um, you made that call, I believe on March 28th since then it’s been kind of flat for both of you, right?

So how long do you think it will take for this to happen?

And you know, if you’re talking about this kind of thing, it’s necessary to fuel Bitcoin.

Mining is a very dirty business.

Why buy Bitcoin?

Well, I mean, I think as a trade, um, uh, we want to be protected, you know, so we’re selling the miners, we think they’re going to go to zero.

Who knows what will happen with Bitcoin.

Your guess is as good as mine in the case of microstrategy.

Uh, I think if it has $14 billion in Bitcoin, the company should be valued at $14 billion by the market.

Um, what you see is a premium that doesn’t make sense, you know, situations where they have $15 billion worth of Bitcoin, but the market is valuing them at 35 billion.

I mean, you know, a bank that holds $100 is valued at $100.

It shouldn’t be valued at $500.

Um, so that’s the microstrategy, in the case of Bitcoin miners it’s just a terrible business.

Um, and in both cases, we own Bitcoin.

Uh, just because we think these stocks are going to go down relative to Bitcoin.

So if you know this, we have no idea whether Bitcoin goes up 100% or goes down 50%.

We are protected.

Sam.

Thank you very much.

Um, it’s good to get your perspective on all these different ideas.

Appreciate it.

Absolutely.

Thanks.

Fuente