Shares of Riot Platforms (NASDAQ:) fell more than 5% on Wednesday after Kerrisdale Capital said it had a short position in the bitcoin miner.
The short-selling firm said the company is “much better at playing energy arbitrage games and issuing shares than generating shareholder value by mining cryptocurrency.”
The firm also described Bitcoin mining as “one of the worst business models for a public company that we have ever encountered.”
This is based on factors such as unpredictable earnings, capital intensity, an extremely competitive sector, and strict regulatory oversight even in cryptocurrency-friendly places like Texas, where Riot produces 100% of its Bitcoin.
In a clear sign of the deteriorating business environment for mining companies in Texas, Kerrisdale said Navarro County commissioners in March voted down a tax cut for Riot’s key development project in Corsicana.
“With numerous low-fee Bitcoin ETFs and ETPs available, why own shares of a company like Riot, where the number of Bitcoins per share and Bitcoin production per share has been steadily declining, rather than simply owning the Bitcoins themselves,” the firm notes.
The analysts conclude: “A riot is a fundamentally bad way for investors to express their views on Bitcoin, and over the long term, the stock has a much better chance of turning to dust than outperforming gains from new digital gold.”