Riot blockchain company has seen a recovery in its shares on June 5 after a report released by short seller Kerrisdale Capital. The report accused Riot of mismanagement and predicted the firm’s collapse, labeling Bitcoin miners as “snake oil salesmen.” Kerrisdale declared a “war” against bitcoin miners, criticizing their use of investor capital and environmental impact.
In response to the report, Riot shares initially dropped by 9.6%, but eventually recovered to close down by 0.21%. Currently trading on the Nasdaq under the ticker RIOT, the stock has risen to $10.31. Kerrisdale’s report criticized Riot’s business model that relies on continuous stock issuance and burning through cash. They argued that Riot’s strategy is unsustainable and damaging to shareholder value.
Kerrisdale also highlighted Riot’s challenges such as regulatory scrutiny in Texas, reduced revenues from the Bitcoin halving, and fierce competition from more cost-efficient global miners. The report questioned the value of investing in Bitcoin mining companies like Riot compared to holding BTC directly or investing in low-fee ETFs. They warned of an impending valuation collapse for Riot and its peers due to regulatory pressure and skepticism towards their business models.
Kerrisdale continued its aggressive stance on X, detailing their strategy and sharing letters addressed to Texas state officials. They labeled Bitcoin mining as capital-intensive, competitive, and regulatory-challenged, arguing against investing in such companies as BTC proxies. Kerrisdale cited RIOT’s struggle to compete globally in cost-effective mining, its poor financial performance, and reliance on incentives and tax credits under scrutiny.
Overall, Kerrisdale’s report has raised concerns about Riot’s business model and future prospects in the face of increasing regulatory pressure and competition from more efficient miners. The firm’s criticism of Bitcoin mining companies like Riot suggests a shift towards investing in direct Bitcoin holdings or low-fee ETFs. Investors may need to reconsider their investments in Riot and similar companies amid the looming threat of valuation collapse.
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