Riot Platforms Inc (RIOT) saw its stock prices bounce back on June 5 following a critical report from short seller Kerrisdale Capital. The report suggested that the company was on the verge of collapse and accused Bitcoin miners of selling deceptive products.
Kerrisdale’s report on June 5 claimed that Riot was more focused on playing financial games and issuing stocks rather than creating value for its shareholders through crypto mining. The firm also declared a “war against Bitcoin miners,” stating that it was betting against Riot but remained bullish on Bitcoin.
Despite initially dropping by 9.6% to $8.84 in the first hour of trading, RIOT shares managed to close down only 0.21% at $9.65 on June 5. The report was released just before the Nasdaq opened, causing some turbulence in the market. In after-hours trading, RIOT shares further declined by 0.73% to $9.58.
A Riot spokesperson responded to Kerrisdale’s report, disagreeing with its claims about the Bitcoin mining industry and Riot’s operations. The spokesperson stated that shareholders would be better off investing in Bitcoin directly rather than in Riot.
Kerrisdale’s argument against Riot focused on the company’s alleged cash burn rate and continuous dilution of shares through stock issuances. The firm claimed that Riot’s balance sheet was sustained by exploiting retail shareholders and criticized its strategy of funding operations through stock sales.
The report also highlighted challenges facing the crypto mining industry, such as regulatory concerns in Texas, reduced revenues from the Bitcoin halving, and increased competition for market share. RIOT, once considered a “Bitcoin proxy,” is now facing stiff competition from low-fee Bitcoin ETFs.
As Bitcoin continues to trade at $71,022, Kerrisdale’s report questioned the rationale behind owning shares in Riot when Bitcoin itself could be a more stable investment. The firm had previously taken a similar stance against MicroStrategy, recommending Bitcoin ETFs as a better investment option.
Despite the initial impact of Kerrisdale’s report, RIOT shares have shown resilience, and the company’s year-to-date gains remain significant. As the cryptocurrency market evolves, companies like Riot will continue to face scrutiny and competition.