Kerrisdale Capital’s Critical Report

According to Kerrisdale’s June 5 report, Riot “does a far better job playing energy arbitrage games and issuing stock than generating shareholder value by mining crypto.”

The corporation included in an accompanying article on X starting “a war against Bitcoin miners, an industry of snake oil salesmen.” It observed it was betting against the business but was long Bitcoin, a wager its price would climb.

Reversing a 9.6% decline to $8.84 in the opening hour of New York’s trading day, RIOT shares finished down 0.21% at $9.65 on June 5. The news surfaced two minutes before the Nasdaq opened. Based on Google Finance, after-hours trading presently shows 0.73% down to $9.58.

Riot’s Response and Market Impact

A Riot spokesman reportedly disagreed with Kerrisdale’s “characterization of the Bitcoin mining industry and of Riot, as well as the equally unsound conclusions reached in the Kerrisdale Capital report.”

“We think these mistakes will be shown by the way our ambitious 2024 expansion plans are carried out and hence the financial performance.”

Kerrisdale’s brief bid thesis revolves around claims that Riot is burning money and that its “balance sheet is purely a function of looting retail shareholders through non-stop dilution.”

Riot claimed to be funding its activities using market-priced equities, which explains why its shares have witnessed an amazing six-fold rise since 2020.

“If Riot were to stop issuing stock, it would be forced to start drawing down on its cash and Bitcoin holdings,” the company stated.

Concerns and Comparisons with Bitcoin ETFs

Reduced income from the Bitcoin halving and a worldwide competition for mining market dominance against rivals who can run cheaper raise crypto mining confront growing concern from officials in Riot’s operational state of Texas.

Once regarded as a “Bitcoin proxy,” according to Kerrisdale, RIOT is also vying with “many low-fee” Bitcoin exchange-traded funds (ETFs).

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“Why own shares in a company like Riot, which has seen Bitcoin holdings per share and Bitcoin production per share steadily decline, versus simply owning Bitcoin itself?” the company said.

“Over the long run, its real character as that of a basic manufacturing company whose only competitive advantage is the capacity to manufacture more stock at a whim will only disappoint shareholders, who will regret not simply buying Bitcoin.”

After rising 0.4% in 24 hours, Bitcoin now trades for $71,322.

Claiming it would be wiser to own Bitcoin ETFs to expose them to the cryptocurrency, Kerrisdale aimed similarly at Bitcoin-holding company MicroStrategy (MSTR).

Google Finance states that MSTR ended at $1704.56 on the day of the report; it has only lost roughly 0.58% since, finishing today at $1,694.69, but is still at a year-to-date gain of over 147%.

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