Kerrisdale Capital's Report Stirs Controversy, Impacts Riot Platforms Inc Stocks
Summary:
Kerrisdale Capital's report predicting the downfall of Riot Platforms Inc has led to a brief but hefty dip in the firm's stock value. Disputing the report, Riot Platforms Inc defended its crypto mining business and growth plans. Kerrisdale maintains that Riot is depleting retail shareholders via nonstop dilution and advises investors to invest directly in Bitcoin or lower-cost exchange-traded funds instead.
Riot Platforms Inc (RIOT) stocks rallied back from a significant June 5 decline triggered by Kerrisdale Capital's hard-hitting report. The short seller firm forecasted Riot's downfall and described Bitcoin (BTC) miners as peddlers of "snake oil." Kerrisdale's report, dated June 5, characterized Riot as better at manipulating energy arbitrage and releasing stock than churning out shareholder value by mining crypto. Following this, Kerrisdale declared a "battle against Bitcoin miners, a fraternity of snake oil sellers," all the while holding a long position on Bitcoin and betting against the company.
RIOT shares suffered a 0.21% dip and finished at $9.65 on June 5, having clawed back from a precipitous 9.6% slump to $8.84 during New York's morning trading hours.
A representative from Riot disagreed with Kerrisdale's assertions and rejected the "unsound findings of the Kerrisdale Capital report". They expressed confidence that the firm's 2024 growth strategy would expose these inaccuracies.
Kerrisdale's argument zeroes in on Riot's tumultuous finances, accusing the firm of nonstop dilution and plundering retail shareholders. The short seller alleged that Riot sustains its operations by releasing stocks at market rates, leading to a sixfold increase in outstanding shares since last year. The firm warned that if Riot ceased this incessant stock issuance, it would exhaust its cash and Bitcoin reserves.
Kerrisdale also touched on the regulatory concerns for crypto mining in Texas, Riot's base of operations. The firm noted the decrease in revenues due to the Bitcoin halving, coupled with the ferocious competition from other mining companies offering cheaper services.
Kerrisdale further questioned why investors would consider Riot over lower-cost Bitcoin exchange-traded funds (ETFs). "Why stick with a company like Riot, whose Bitcoin holdings and production per share have dwindled, instead of simply investing in Bitcoin?" the firm posed. They insisted that shareholders would eventually be disillusioned and rueful about their decision not to buy Bitcoin directly.
Kerrisdale previously criticized MicroStrategy (MSTR), another Bitcoin-holding company, advising investors to choose Bitcoin ETFs for cryptocurrency exposure instead. Despite closing at $1704.56 on the day of Kerrisdale's report, MSTR has lost only about 0.58% since, closing at $1,694.69 today. Nevertheless, it maintains an annual gain of more than 147%, as per Google Finance.
Published At
6/6/2024 4:39:58 AM
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