RIOT shares, of Riot Platforms Inc, experienced a significant drop on June 5 following a critical report from short seller Kerrisdale Capital. The report claimed that the company was on the brink of collapse and accused Bitcoin miners of selling deceptive products.
Kerrisdale’s report on June 5 alleged that Riot was more focused on playing financial games and issuing stock rather than creating value for shareholders through crypto mining. In a separate statement, the firm declared a “war against Bitcoin miners,” describing them as sellers of snake oil. Despite betting against Riot, Kerrisdale disclosed that they were bullish on Bitcoin’s future price.
After hitting a low of $8.84, RIOT shares closed down 0.21% at $9.65 on June 5, recovering slightly from a 9.6% decline. The report was released just minutes before the Nasdaq market opened for trading. In after-hours trading, the stock dropped 0.73% to $9.58, as reported by Google Finance.
A Riot spokesperson responded to Kerrisdale’s claims, expressing disagreement with the negative portrayal of the Bitcoin mining industry and Riot. Kerrisdale’s assertions about the company’s financial practices were dismissed as unfounded.
Kerrisdale’s argument against Riot focused on allegations of excessive cash burn and continuous dilution of shareholders. The firm accused Riot of issuing stocks at market price to fund its operations, resulting in a sixfold increase in outstanding shares since 2020. Kerrisdale also highlighted regulatory concerns, reduced revenues from the Bitcoin halving, and intensified competition in the mining sector as factors affecting Riot’s future prospects.
Despite being considered a “Bitcoin proxy” in the past, RIOT now faces competition from more cost-effective Bitcoin ETFs. Kerrisdale questioned the value of owning shares in Riot compared to holding Bitcoin directly, especially as the company’s Bitcoin holdings and production have been declining.
While Bitcoin’s price has increased by 0.4% in the past 24 hours, trading at $71,022, according to Cointelegraph Markets Pro, Kerrisdale’s previous criticism of Bitcoin-holding firm MicroStrategy had a minimal impact on its stock price. MicroStrategy’s shares closed at $1,694.69, maintaining a year-to-date gain of over 147%.
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