TLDR
- Bitmine Immersion Technologies stock dropped 2% after Kerrisdale Capital released a short report on the company
- Kerrisdale claims Bitmine’s business model of selling stock at a premium to buy Ethereum is becoming outdated
- The company has issued over $10 billion in new stock in three months, about $170 million daily
- A recent $365 million offering described as “materially accretive” was criticized as a “discounted giveaway” by Kerrisdale
- Kerrisdale suggests investors should buy Ethereum directly rather than through Bitmine’s vehicle
Bitmine Immersion Technologies stock fell 2% on Wednesday morning. The decline came after short-seller Kerrisdale Capital published a report targeting the company.
Kerrisdale’s report questions the viability of Bitmine’s business approach. The firm calls the model one that is “chasing a model that is on its way to extinction.”
Bitmine operates as an $18 billion Ethereum-focused digital asset treasury. The company sells stock at a premium to the value of tokens on its balance sheet. It then uses those proceeds to buy more cryptocurrency.
Kerrisdale argues this strategy no longer works in today’s market. The short-seller points to investor exhaustion as a key problem.
Stock Issuance Under Scrutiny
The pace of new stock sales has raised eyebrows. Bitmine issued more than $10 billion in new stock over just three months. That works out to roughly $170 million per day.
Kerrisdale claims this flood of new shares has consequences. While total ETH tokens have grown, the pace of ETH-per-share growth has slowed down.
The narrowing premium between net asset value and market price plays a role. So does the expanding share count.
One recent transaction drew particular criticism. Bitmine completed a $365 million direct offering that management called “materially accretive.”
Kerrisdale disagrees with that characterization. The short-seller labeled it “a discounted giveaway” when factoring in the attached warrants.
Direct Investment Alternative
Kerrisdale’s position doesn’t represent a bet against Ethereum itself. The firm takes issue with paying a market premium for ETH through Bitmine’s structure.
The report suggests several alternatives for investors. They could buy Ethereum directly on exchanges. They could stake it for yield. They could access it through ETFs.
All of these options would avoid the premium baked into Bitmine’s share price. They would also sidestep the dilution from constant new share issuances.
The competitive environment for digital asset treasuries is changing. According to The Block, US-listed firms pursuing similar crypto-treasury strategies plan to raise over $100 billion in capital this year.
That level of competition could make it harder for any single company to maintain a premium valuation. More players chasing the same strategy typically compresses margins and multiples.
Bitmine’s model depends on maintaining that premium to net asset value. Without it, the math behind issuing new shares to buy more tokens breaks down.
The stock traded lower following the report’s release. Kerrisdale disclosed its short position when publishing the research.
Bitmine has issued over $10 billion in new equity in the past 90 days. The $365 million direct offering included warrants that Kerrisdale views as dilutive to existing shareholders.
