KEY POINTS
- The short seller said Riot's 'honeymoon' phase with Texas as a suitable crypto mining hub is over
- It also said Riot is a 'fundamentally poor way' for investors to express their views on Bitcoin
- Kerrisdale previously went short on MicroStrategy, which holds 214,000 Bitcoin
Short seller Kerrisdale Capital has released a highly critical report on Bitcoin mining and digital infrastructure company Riot Platforms, saying it is "headed for a mine collapse" due to its BTC strategy.
The short seller said in a Wednesday report that Riot "does a far better job playing energy arbitrage games and issuing stock than generating shareholder value by mining crypto," blasting Riot shareholders for accepting "excessive management compensation and serial dilution."
Kerrisdale argued that the "honeymoon" phase for Riot and its mining operations in Texas, which previously had a lax regulatory space for miners, is now over. There have been recent concerns about the crypto mining industry's impact on the environment, as per Kerrisdale.
"A clear sign of how the business environment for miners has soured in Texas occurred in March when Navarro County commissioners voted against a tax abatement for Riot's key growth project in Corsicana," the short seller said. It went on to say that Riot is a "fundamentally poor way for investors to express a view on Bitcoin," the world's top digital asset by market cap.
Kerrisdale expects global crypto mining rivalries to only intensify instead of decline in the coming years, and Riot won't be spared from the heat of the competition.
Being a public company, Riot should not be dabbling into Bitcoin mining, Kerrisdale argued, as "Bitcoin mining is easily among the worst business models for a public company we have ever encountered."
Riot appears unfazed by the report. The company revealed Wednesday that it acquired a 12% stake in its rival, Bitfarms. Riot previously proposed to acquire Bitfarms, citing concerns that some of its rival's directors may not be committed to acting in the best interests of all shareholders. Bitfarms rejected the proposal and as a result, Riot acquired a 9.25% stake in the former, becoming the largest stockholder.
Still, Riot shares were down over 6% Wednesday, highlighting the impact of Kerrisdale's report.
This isn't the first time Kerrisdale went short on a company involved in Bitcoin. Late in March, the short seller criticized BTC maximalist Michael Saylor's MicroStrategy, saying the company's stock may be overpriced. At the time, it pointed out that consumers no longer need MicroStrategy to access Bitcoins, and the Tysons-based tech firm that holds 214,000 Bitcoin no longer has the "unique" edge it had before other BTC-access offerings emerged.
