Shares in Riot Platforms Inc (RIOT) recovered from a hefty dip on June 5 after a strongly-worded report from short seller Kerrisdale Capital, claiming the firm would collapse and that Bitcoin (BTC) miners are selling “snake oil.”

Kerrisdale’s June 5 report claimed Riot “does a far better job playing energy arbitrage games and issuing stock than generating shareholder value by mining crypto.”

In an accompanying post on X, the firm added it was launching “a war against Bitcoin miners, an industry of snake oil salesmen.” It noted it was betting against the company but was long Bitcoin — a bet its price will rise.

RIOT shares closed down 0.21% at $9.65 on June 5, recovering from a 9.6% drop to $8.84 in the first hour of New York’s trading day. The report came out around 2 minutes before the Nasdaq opened. 

It’s now down 0.73% in after-hours trading to $9.58, per Google Finance.

A Riot spokesperson told Cointelegraph it disagreed with Kerrisdale’s “characterization of the Bitcoin mining industry and of Riot, and the equally unsound conclusions reached in the Kerrisdale Capital report.”

"We believe these errors will be demonstrated through the execution of our ambitious 2024 growth plans and resulting financial performance."

Shareholders “will regret not simply buying Bitcoin”

Kerrisdale’s short bid thesis centers on accusations that Riot is burning through cash and its “balance sheet is purely a function of looting retail shareholders through non-stop dilution.”

It claimed Riot was issuing stocks at market price to fund its operations which has seen its shares outstanding increase sixfold since 2020.

“If Riot were to stop issuing stock it would be forced to start drawing down on its cash and Bitcoin holdings,” the firm wrote.

It added crypto mining faces increasing concern from regulators in Riot’s operating state of Texas, slashed revenues from the Bitcoin halving and a global race for mining market share against competitors who can operate cheaper.

Related: Bitcoin halving impacts miner Riot’s revenue by 43% despite new facility

RIOT, once considered a “Bitcoin proxy” according to Kerrisdale, is also now competing against “numerous low-fee” Bitcoin exchange-traded funds (ETFs).

“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,” the firm asked.

“Over the long-term, its true nature as that of a basic manufacturing company whose only competitive advantage is the ability to manufacture more stock at a whim will only disappoint shareholders who will regret not simply buying Bitcoin.”

Bitcoin has climbed 0.4% in 24 hours to trade at $71,022, according to Cointelegraph Markets Pro.

On March 28, Kerrisdale took a similar shot at Bitcoin-holding firm MicroStrategy (MSTR), claiming it was better to instead hold Bitcoin ETFs to get exposure to the cryptocurrency.

MSTR closed at $1704.56 on the day of the report, its only down around 0.58% since — closing today at $1,694.69 but is still at a year-to-date gain of over 147%, according to Google Finance.

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