Shares of BitMine Immersion Technologies ended a choppy day of trading with a modest gain after the cryptocurrency company became the latest short-selling target of Kerrisdale Capital.
Kerrisdale he said Wednesday’s report said Tom Lee’s BitMine is “chasing a model that is on the road to extinction” by taking a low position on the company on the assumption that its shares will fall.
Kerisdale argued that BitMine’s strategy of selling shares at a premium to buy Ether (ETH) and increasing its token per share ratio is no longer effective, and that the company’s value relative to its cryptocurrency portfolios is degenerating.
BitMine is a Bitcoin (BTC) mining company that changed its strategy to acquire vast amounts of ETH earlier this year and became the largest public holder of the token. Kerrisdale pegs Bitmine’s per-share token count at 9 Ether per 1,000 shares, with the company holding 2.83 million ETH worth over $12.5 billion.
It is one of dozens of cryptocurrency vault companies that buy huge amounts of cryptocurrencies in hopes of attracting the attention of investors.
BitMine did not immediately respond to a request for comment.
BitMine shares end Tuesday on a positive note
Investors were initially hesitant as the stock opened above $60, but following Kerrisdale’s report, it fell more than 5% in early trading to an intraday low of $57.41. However, BitMine (BMNR) stock ended up 1.35% at $60 on Tuesday and was still up 0.4% after the bell.
Kerrisdale has targeted other crypto companies, including bitcoin mining firm Riot Platforms and bitcoin purchasing firm Strategy.
Riot dismissed Kerrisdale’s report at the time, telling Cointelegraph that it reached “unreasonable conclusions.” The strategy did not respond directly to the short-selling report, but CEO Michael Saylor has long touted the company’s attractiveness to investors.
Kerrisdale says the share issue is causing investor fatigue
In his report, Kerrisdale also criticized the pace of BitMine’s stock offerings, noting that the company has raised $10 billion in the past three months, largely through market share sales.
“The sheer speed of BMNR share issuance has turned initial enthusiasm into fatigue, with investors conditioned to believe that any increase will result in more supply,” Kerrisdale said.
It said BitMine’s $365 million stock offering in overdue September was a “discount offer” and argued that the deal was a “cleverly orchestrated, dilutive raise that sacrificed long-term credibility for short-term cash.”
Tom Lee is no Michael Saylor, says Kerrisdale
Kerrisdale also slammed BitMine’s executive chairman, Lee, claiming that while he “brings recognition to the company,” he “does not enjoy the cult-like fan base that has turned Michael Saylor into a meme icon capable of issuing billions of shares without losing investor enthusiasm.”
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He added that BitMine’s strategy requires “scarcity, charisma and probably something more innovative” than issuing shares on the market, but said the company “offers none of these.”
Kerrisdale also criticized other parts of BitMine’s business, saying it had stopped reporting net asset value (NAV) per share due to slowing growth, and the net asset value (mNAV) multiple premium had fallen from more than 2.0x in August to 1.2x in September.
“BMNR’s premise is based on the assumption that it can deliver more than just a token,” it said. “But the strategy is generic, competition is mushrooming, disclosures have become opaque, ETH per share has declined, and capital raises promoted as a ‘bonus’ are actually dilutive.”
The company said its target for BitMine “is not a bet against Ethereum itself, but rather against the notion that investors should continue to pay a market premium for it.”
“If you want ETH, just buy it outright, stake it with minimal friction, or hold it in one of the fast-moving ETFs,” he argued.
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