Riot Platforms Inc (RIOT) saw a significant recovery in its shares on June 5 following a harsh report from short seller Kerrisdale Capital, which predicted the company’s downfall and criticized Bitcoin miners as “snake oil” sellers.
Kerrisdale’s report on June 5 accused Riot of prioritizing energy arbitrage and stock issuance over creating value for shareholders through crypto mining. The firm declared a war against Bitcoin miners, describing them as deceitful salesmen of snake oil. Despite betting against Riot, Kerrisdale expressed optimism about Bitcoin’s price increase.
On June 5, RIOT shares closed down by 0.21% at $9.65, bouncing back from a 9.6% drop to $8.84, shortly before the Nasdaq opened. In after-hours trading, the shares dropped by 0.73% to $9.58.
Riot defended itself against Kerrisdale’s accusations, stating its disagreement with the characterization of the Bitcoin mining industry and the conclusions drawn in the report. The company suggested that shareholders would have been better off simply buying Bitcoin.
Kerrisdale’s short bid thesis highlighted Riot’s cash burn rate and alleged that the company was diluting retail shareholders through continuous stock issuance. It pointed out that Riot’s outstanding shares had increased sixfold since 2020. The firm also raised concerns about regulatory scrutiny in Texas, reduced revenues from the Bitcoin halving, and intense competition in the mining market.
Despite being considered a “Bitcoin proxy” in the past, RIOT is now facing competition from low-fee Bitcoin ETFs. Kerrisdale questioned the rationale behind investing in Riot instead of directly holding Bitcoin, given Riot’s declining Bitcoin holdings and production.
Bitcoin’s price rose by 0.4% in 24 hours, reaching $71,022, according to Cointelegraph Markets Pro. Kerrisdale had previously targeted MicroStrategy (MSTR), advising investors to opt for Bitcoin ETFs instead. MSTR’s stock price has experienced minimal fluctuations since the report, closing at $1,694.69 but still showing a year-to-date gain of over 147%.
It appears that Bitcoin’s trajectory is heading towards a collision with promises of achieving ‘Net Zero’ emissions.