Riot Platforms (NASDAQ:RIOT) shares fell more than 5% Wednesday after Kerrisdale Capital said it is short the bitcoin miner.
The short-selling firm claimed the company "does a far better job playing energy arbitrage games and issuing stock than generating shareholder value by mining crypto."
The firm also described Bitcoin mining as "easily among the worst business models for a public company we have ever encountered."
This is based on what it says are factors including unpredictable revenue, capital intensity, the extremely competitive sector, and intense regulatory scrutiny even in crypto-friendly places like Texas, where Riot has 100% of its bitcoin production.
Kerrisdale argues that a clear sign of how the business environment for miners has soured in Texas occurred in March when Navarro County commissioners voted against a tax abatement for Riot's key growth project in Corsicana.
"With numerous low fee bitcoin ETFs and ETPs, why own shares in a company like Riot, which has seen bitcoin holdings per share and bitcoin production per share steadily decline, versus simply owning bitcoin itself," remarks the firm.
Analysts conclude: "Riot is a fundamentally poor way for investors to express a view on bitcoin and over the long-term shares have a much greater chance of being diluted into dust than outpacing gains from the new digital gold."