Kerrisdale Capital Targets Bitcoin Miners Amidst Riot Platforms' Defence and Rising Stocks
Summary:
Kerrisdale Capital has launched a critique against Bitcoin miners, particularly Riot Platforms, claiming unfavourable business models and overconsumption of energy. Riot has dismissed these accusations as flawed. William Foxley of The Mining Pod remains optimistic about the industry's future, regardless of Kerrisdale’s claims. Riot's stocks initially fell after Kerrisdale's report was released but have since rebounded. The latter also lobbied legislators against further tax breaks for Riot, while Riot seems to rely on support from former President Trump, who favors the Bitcoin mining industry.
Kerrisdale Capital is stepping up its campaign against Bitcoin miners, accusing them of being the equivalent of modern day conmen. Many mining companies have opted not to respond. The investment firm's attack comes in line with its recent investment overview, which prophesizes a mining collapse for Riot Platforms. Kerrisdale Capital's CEO, Sahm Adrangi, explained that many companies he believes are inherently unprofitable resort to stock dilution by issuing new shares and reinvesting that capital into the business. Kerrisdale's report argues that Riot issued $41 million worth of shares in the first few months of 2024 alone, equating to an 18% dilution of stock. According to Adrangi, these business models aren't feasible and are setting the U.S. mining industry up for failure, leading Kerrisdale to short on Riot.
In reaction to Kerrisdale's report, Riot has defended itself, denying any validity in Kerrisdale's investment report predictions. In defense of the Bitcoin mining industry stateside and Riot in particular, a spokesperson for Riot dismissed the conclusions of the Kerrisdale Capital report as flawed and trust in their ambitious growth strategy for 2024 to vindicate their stance. Despite offering various U.S. Bitcoin mining entities the opportunity to comment, Cointelegraph received no response.
For another take on the situation, Cointelegraph turned to William Foxley of The Mining Pod. Foxley remains optimistic about Bitcoin mining in the U.S., especially under Trump's administration. According to him, even without Trump, Bitcoin miners would still have the support of Bitcoin-friendly states like Texas and Tennessee. Foxley believes it's a risky move to short on Bitcoin mining due to the potential for successful execution of development funding through share issuance.
However, Kerrisdale maintains that the charm of Texas for Bitcoin miners due to inexpensive energy and a relaxed regulatory scene is fading. They claim Bitcoin miners are a drain on the energy system, a problem exacerbated in Texas during peak summer seasons when energy prices rise. Consequently, this high consumption of electricity by Bitcoin miners is sparking outrage among Texan citizens.
Kerrisdale Capital's critique of U.S. Bitcoin mining extends beyond its analyses. The firm also engaged with lawmakers, advising against giving any future tax breaks to Riot. One aspect of Kerrisdale's lobbying efforts includes citing allegations by a former Riot employee about inadequate safety measures at one of Riot's facilities. Kerrisdale also states that Riot has been using a product from ExxonMobile not specifically approved by the company for cooling their immersion miners.
Despite the initial impact of Kerrisdale's allegations resulting in a decrease in Riot's stock value, it has since regained strength, showing signs of resilience in the face of short-term adversity. Meanwhile, Riot appears to be banking on support from Trump. The former president has shown favor toward the industry, portraying Bitcoin mining as a pivotal defense against a potential central bank digital currency in the U.S. However, Adrangi remains unswayed by Trump's remarks, indicating that his current views on Bitcoin mining remain unchanged.
Published At
6/13/2024 4:35:00 PM
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