Riot Platforms Stock Falls After Kerrisdale Short Position

by | Jun 6, 2024 | Bitcoin | 0 comments

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Riot Platforms (RIOT), a well-known Bitcoin mining company, experienced a decline in its stock value on Wednesday. This drop came shortly after Kerrisdale Capital, a noted short-seller, disclosed its short position in RIOT and a concurrent long position in Bitcoin (BTC). The announcement was made through a post on X, where Kerrisdale criticized Riot’s business model, likening it to a “dysfunctional hamster wheel of cash burn.”

Kerrisdale argued that Riot, similar to other U.S.-listed miners, primarily relies on continuous at-the-market (ATM) equity offerings to fund its operations. This strategy, according to Kerrisdale, is harmful to retail shareholders. The firm also pointed out that despite Bitcoin nearing its all-time high prices, Riot’s mining operations remain unprofitable, particularly in the challenging environment following Bitcoin’s reward halving.

The strategic stance of Kerrisdale involves not only shorting Riot but also investing in Bitcoin directly, which they believe has better long-term prospects. This approach highlights their skepticism towards Riot’s operational and financial sustainability while endorsing the underlying value of Bitcoin itself.

On the day Kerrisdale made its position public, Riot’s shares saw a sharp decrease of more than 6%, making it one of the poorest performers among cryptocurrency-related stocks that day. This occurred even as the price of Bitcoin itself was on the rise, further distancing the fortunes of the cryptocurrency from the company that mines it.

The negative reaction to Riot’s stock also follows closely on the heels of the company’s recent aggressive maneuvers in the crypto mining sector. Just a week prior to the decline, Riot had launched a hostile takeover bid for another mining company, Bitfarms (BITF). By acquiring a 9.25% stake, Riot became the largest shareholder of Bitfarms. This move is part of Riot’s broader strategy to expand its influence and operations within the industry, even amid growing concerns about its financial strategies and the broader viability of its business model in the current economic landscape of cryptocurrency mining.

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