On Wednesday, Riot Platforms (RIOT), a prominent player in Bitcoin mining, experienced a notable decline in its stock value following the revelation by renowned short-seller Kerrisdale Capital of its short position on RIOT alongside a long position on Bitcoin (BTC).
Kerrisdale Capital, in a statement posted on X, unleashed a barrage of criticism towards Riot’s business model, characterizing it as a “dysfunctional hamster wheel of cash burn.” The firm pointed out that Riot, akin to other miners listed in the U.S., heavily relies on continuous ATM issuance to sustain its operations, a practice deemed unfavorable for retail shareholders. Moreover, Kerrisdale emphasized that despite Bitcoin hovering near its historical peaks, Riot’s mining activities remain unprofitable, particularly in the aftermath of the halving event.
The strategic move by Kerrisdale encompasses holding Bitcoin as a safeguard against its short position in Riot. This dual-sided approach underscores the firm’s faith in the enduring potential of Bitcoin while casting doubts on the financial robustness of the mining enterprise. In the wake of Kerrisdale’s announcement, Riot’s shares experienced a plunge of over 6%, marking one of the steepest declines among stocks linked to the crypto sphere, despite the upward trajectory of Bitcoin’s price.
This development unfolds merely a week following Riot’s initiation of a hostile takeover bid for Bitfarms (BITF), wherein it secured a 9.25% ownership stake to emerge as the principal shareholder. Riot’s assertive maneuver within the industry underscores its aspirations for expansion, even amidst intensified scrutiny surrounding its financial modus operandi.
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