Bitcoin
Riot Platforms Targeted in Kerrisdale Capital Short Selling Report: Details (UPDATED)
Riot Platforms Targeted in Kerrisdale Capital Short Selling Report: Details (UPDATED)
Editor’s Note: We’ve updated the story with Riot Platform’s response to the short sale report.
Riot Platforms, Inc. (NASDAQ:REBELLION) shares are trading lower after Kerrisdale Capital Founder and Chief Investment Officer Sahm Adrangi released a stock report.
Adrangi expressed a negative opinion about Riot Platforms, a $3 billion Bitcoin (CRYPTO: Bitcoin) mining company that excels more at energy arbitrage and issuing shares than creating shareholder value through crypto mining.
According to the analyst, Bitcoin mining is one of the worst business models for a public company due to unpredictable revenues, high capital requirements, fierce competition, the commodity nature of the product, and increasing regulatory scrutiny, even in crypto-friendly locations like Texas. , where Riot operates.
Given these drawbacks, it’s not surprising that Riot has never produced positive cash flow or a decent return, he highlighted.
However, it is surprising that Riot shareholders tolerate excessive management compensation and frequent dilution.
Riot issued more than $507 million worth of shares (18% dilution) through April alone, with the latest issuance at prices similar to the current share price. Adrangi said shareholders should question why management believes it is better to sell Riot shares and hold Bitcoin and whether they should do the same.
Bitcoin miners like Riot were attracted to Texas by its cheap energy and tolerant regulatory environment, but the analyst said this honeymoon period is ending.
Similar to global standards, concerns about environmental impact and other externalities have led to greater oversight and legislation that could limit financial incentives for miners in Texas.
Riot investors appear oblivious to political and regulatory changes as another summer approaches that will test Texas’ fragile power grid, Adrangi said.
This is because Bitcoin miners face significant profitability cuts following the latest block reward halving. As May production numbers and second-quarter results arrive, investors will better understand the industry’s weak unit economics, which were already questionable before the halving, according to the analyst.
In an emailed statement to Benzinga, Riot Platforms said: “We disagree with the characterization of the Bitcoin mining industry and Riot, and the similarly baseless 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.”
The story continues
Adrangi added that investors now have better options for Bitcoin exposure with low-fee ETFs and ETPs.
Riot Platforms lost 16% in the last 12 months. Investors can gain exposure to stocks through Global X Blockchain ETF (NASDAQ:BKCH) It is Fidelity Crypto Industry and Digital Payments ETF (NASDAQ:FDIG).
Price Action: RIOT shares are trading down 2.27% to $9.45 at last check Wednesday.
Disclaimer: This content was produced in part with the help of AI tools and was reviewed and published by Benzinga editors.
Photo via Shutterstock
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This article Riot Platforms Targeted in Kerrisdale Capital Short Selling Report: Details (UPDATED) originally appeared in Benzinga.com
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