Riot Platforms, Inc. shares are down after prominent short-seller Kerrisdale Capital’s Founder and Chief Investment Officer, Sahm Adrangi, released their report on the stock.
Riot Platforms’ shares fell 6.93% to $9.00 following Kerrisdale Capital’s pessimistic report on the Bitcoin miner.
Adrangi gave a bearish opinion on Riot Platforms, a $3 billion Bitcoin miner that specializes in energy arbitrage and stock issuance rather than generating shareholder value through crypto mining.
According to Kerrisdale analysts, Bitcoin mining is one of the worst business models for a public company because of the unpredictable revenue, high capital requirements, fierce competition, commodity nature of the product, and increasing regulatory scrutiny, even in crypto-friendly states such as Texas, where Riot operates.
Riot has issued more than $507 million in stock (18% dilution) through April alone, with the most recent issuance at levels comparable to the current stock price. Adrangi suggested that shareholders should examine 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 drawn to Texas because of its cheap electricity and lax regulatory environment, but the expert claimed that the honeymoon phase is over. Concerns about environmental effects and other externalities have led to increased supervision and legislation in Texas, which may limit financial incentives for miners.
Riot investors appear to be indifferent to political and regulatory moves as another summer approaches, putting Texas’ frail electric infrastructure to the test, according to Adrangi.
This comes as Bitcoin miners face significant profitability cuts as a result of the most recent block reward halving. As May production statistics and Q2 results become available, investors will gain a clearer understanding of the industry’s weak unit economics, which were already questionable prior to the cut, according to the analyst.
Adrangi stated that low-fee ETFs and ETPs provide investors with more options for Bitcoin exposure. Riot Platforms fell 16% over the last year. Investors can obtain exposure to the stock through the Global X Blockchain ETF and Fidelity Crypto Industry And Digital Payments ETF.
The company stated, “Like other US listed miners, $RIOT’s biz model is a dysfunctional hamster wheel of cash burn, which is why it loots retail shareholders with non-stop ATM issuance to fund operations. Even with $BTC near all-time highs, post-halving $RIOT’s mining ops aren’t profitable.”
Also Read: Riot Platforms Makes Bold Bid to Acquire Bitfarms
