Investment firm Kerrisdale Capital has launched a critical campaign against Bitcoin miners, labeling the industry as “snake oil salesmen.”
Their latest report targets Riot Platforms, claiming it is “headed for a mine collapse.”
Kerrisdale’s CEO, Sahm Adrangi, discussed their position with Cointelegraph.
“When you don’t have a viable business model — and we see this in the public markets all the time — if you’ve got a business that you know is structurally unprofitable, these companies dilute,” said Adrangi. “They issue shares, they take those shares to invest in the business. But there are no returns.”
According to Kerrisdale, Riot issued $41 million in shares in the first four months of 2024, diluting stock by 18%.
Adrangi argued, “These are not viable business models. The [United States mining] businesses are structurally screwed — the industry is one of the worst I’ve ever seen.” Kerrisdale has taken a short position on Riot.
In response, Riot refuted these claims, stating, “We disagree with the characterization of the Bitcoin mining industry and of Riot, and the equally unsound conclusions reached in the Kerrisdale Capital report.
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“We believe these errors will be demonstrated through the execution of our ambitious 2024 growth plans and resulting financial performance.”
Despite efforts to contact other U.S. Bitcoin mining firms, none were available to comment. Cointelegraph also spoke with William Foxley of The Mining Pod, who offered a contrasting view.
“Bitcoin mining in the U.S. is incredibly bullish, especially with another Trump presidency,” said Foxley, highlighting potential political support and state-level protections for miners.
Kerrisdale criticized Texas’s energy policy towards Bitcoin mining, citing recent decisions against tax reductions for Riot’s projects and rising energy costs affecting residents.
Adrangi commented, “This whole idea that these Bitcoin miners are good for the grid. It’s such a tortured thought process, and I can’t believe people actually buy into it.”
Kerrisdale has also contacted state legislators, urging them to deny future abatements for Riot.
They referenced safety concerns at Riot’s Rockdale facility and the use of non-approved cooling fluids. These efforts led to an initial drop in Riot’s stock price, though it has since stabilized.
Despite Kerrisdale’s aggressive stance, Riot has garnered support from former President Donald Trump, who advocated for Bitcoin mining in the U.S. as a defense against a central bank digital currency (CBDC). Adrangi, however, remains skeptical of Trump’s influence on the industry’s viability.
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