US Bitcoin Miners Silent on Kerrisdale ‘Snake Oil’ Allegations

Kerrisdale Capital, an investment firm, has initiated what it describes as “a war against Bitcoin miners,” labeling them as “snake oil salesmen.” The company’s claims coincide with its latest investment report, which specifically targets Riot Platforms, stating that the company is “headed for a mine collapse.” In an interview with , Sahm Adrangi, CEO of Kerrisdale, elaborated on these claims. He criticized the business models of Bitcoin mining companies, saying they are structurally unprofitable and tend to dilute their stocks without generating returns. According to Kerrisdale, Riot Platforms issued $41 million in shares in the first four months of 2024, resulting in an 18% stock dilution.

In response to these accusations, a spokesperson for Riot Platforms strongly refuted Kerrisdale’s claims, characterizing them as baseless. The spokesperson asserted that Riot’s ambitious 2024 growth plans and subsequent financial performance would demonstrate the inaccuracies in Kerrisdale’s arguments. Despite multiple attempts by to contact other U.S.-based Bitcoin mining firms for their viewpoints, they either declined to comment or were unavailable.

To provide an alternative perspective, interviewed William Foxley, a seasoned insider in the Bitcoin mining industry and representative of a leading podcast on the subject. Foxley expressed a bullish outlook for Bitcoin mining in the U.S., particularly under the influence of another potential Trump presidency. He highlighted the shifting political winds favoring energy production and mentioned the potential special protections for Bitcoin miners under the Trump administration. Regardless of Trump’s political future, Foxley noted that states like Texas and Tennessee are supportive of Bitcoin miners, making it a bad time to short Bitcoin mining stocks.

Adrangi has voiced concerns about the sustainability and impact of Bitcoin mining, particularly in states like Texas, known for its cheap energy and lenient regulatory environment. He criticized the notion that Bitcoin miners are beneficial for the grid and noted that their high energy consumption puts a strain on the system. As evidence, Kerrisdale’s report mentioned a recent decision in Navarro County, where commissioners voted against a tax reduction for one of Riot’s key growth projects. Legislators are growing cautious about offering preferential tax conditions to the industry, especially with Texas residents facing steep energy prices.

The backlash against Bitcoin mining in Texas is gaining momentum, exacerbated by high energy consumption and rising electricity costs. Some residents and organizations, like the Texas Coalition Against Cryptomining, argue that Bitcoin miners squander energy and drive up electricity bills. Despite these challenges, Riot Platforms is expected to seek further tax abatements, continuing the debate on the industry’s impact.

Kerrisdale didn’t stop at publishing a report; they also contacted state legislators to dissuade them from approving any future tax abatements for Riot Platforms. Adrangi emphasized the need to push the industry out of the U.S., similar to its expulsion from China. Citing safety concerns from a former worker at Riot’s Rockdale facility, the report detailed hazardous conditions and improper use of cooling fluids. Kerrisdale hopes these allegations will discourage legislators from granting further concessions to the industry.

The release of Kerrisdale’s report had an immediate impact on Riot’s stock price, which fell by 8.9% to $9.65 on June 5. The stock rebounded shortly thereafter, fluctuating between $9.50 and $10.96 over the past month. At the time of writing, Riot’s stock price hovered around the $10 mark, indicating the company may have weathered the report’s initial fallout.

In a counter-move, Riot Platforms has been making efforts to gain political favor, particularly from Donald Trump. Following a meeting with Riot’s CEO Jason Les and head of public policy Brian Morgenstern, Trump released a statement in strong support of the Bitcoin mining industry. He framed Bitcoin mining as a defense against a U.S. central bank digital currency and criticized the current administration’s stance on Bitcoin.

When asked about Trump’s supportive comments, Adrangi remained unimpressed. He dismissed Trump’s backing as mere words without substantial impact on his assessment of the Bitcoin mining industry. According to Adrangi, the underlying issues with the business models and environmental impact of Bitcoin miners remain unchanged, despite political endorsements.