Plunge

Bitcoin

April

Shares of Riot Platforms, Inc. experienced a sharp decline following a pessimistic report from Kerrisdale Capital, led by Founder and Chief Investment Officer Sahm Adrangi. Riot's stock dropped 6.93% to $9.00 after Kerrisdale criticized the Bitcoin mining company's business model and financial practices, according to <a href="https://www.cryptotimes.io/2024/06/05/riot-platforms-shares-drop-after-kerrisdale-bearish-report/" rel="noopener noreferrer nofollow">Cryptotimes</a>.
Kerrisdale's report highlighted several concerns, labeling Bitcoin mining as a poor business model for public companies due to its unpredictable revenue, high capital requirements, intense competition, and increasing regulatory scrutiny. The report noted that Riot has issued over $507 million in stock through April 2024, causing an 18% dilution. Kerrisdale questioned Riot's strategy of selling shares to hold Bitcoin, suggesting that shareholders should reconsider their investment.
Adrangi's comments were particularly harsh, describing <a href="https://ultramining.com/news/en/russias-bitcoin-gold-rush-mining-machine-influx-outpaces-rest-of-the-world/" rel="noopener noreferrer nofollow">Bitcoin miners</a> as "snake oil salesmen" and calling for their banishment from the U.S., similar to how Chinese RTO frauds were expelled a decade ago. He pointed out that the favorable conditions in Texas, such as cheap <a href="https://ultramining.com/news/en/minnesota-man-faces-accusations-of-electricity-theft-for-bitcoin-mining/" rel="noopener noreferrer nofollow">electricity</a> and lax regulations, are fading as the state imposes more oversight and legislation, which could affect miners' financial incentives.
The timing of Kerrisdale's report coincides with significant challenges facing Bitcoin miners, including profitability cuts following the recent block reward halving. The report predicts that upcoming production statistics and Q2 results will reveal the industry's weak unit economics, exacerbated by the halving.
Riot Platforms has struggled over the past year, with its stock falling 16%. Kerrisdale suggested that investors seeking Bitcoin exposure might prefer low-fee ETFs and ETPs over direct investments in mining companies. The report also described Riot's business model as a "dysfunctional hamster wheel of cash burn," reliant on continuous stock issuance to fund operations, which remains unprofitable even with Bitcoin near all-time highs.

Riot Platforms Shares Plunge After Kerrisdale Capital’s Bearish Report

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