TLDR
- BitMine Immersion Technologies stock dropped over 5% before recovering after Kerrisdale Capital issued a short report
- The short seller claims BitMine’s model of selling shares to buy Ethereum is no longer effective
- BitMine raised $10 billion in three months through stock sales, approximately $170 million daily
- The company holds 2.83 million ETH valued at over $12.5 billion as the largest public Ethereum holder
- Kerrisdale argues investors should buy ETH directly instead of paying a premium through BitMine stock
BitMine Immersion Technologies experienced volatile trading after Kerrisdale Capital published a short report challenging the company’s Ethereum treasury strategy. The stock opened above $60 but fell over 5% to $57.41 before recovering to close up 1.35% at $60.
Kerrisdale Capital disclosed a short position on BitMine, betting the stock will decline. The investment firm released research calling BitMine’s business approach “a model that is on its way to extinction.”
The company operates as an $18 billion Ethereum-focused digital asset treasury. BitMine sells stock at a premium to its cryptocurrency holdings and uses proceeds to purchase more ETH.
BitMine started as a Bitcoin mining company before shifting strategy this year. The firm now focuses exclusively on accumulating Ethereum and has become the largest public holder of the token.
Rapid Stock Issuance Draws Criticism
Kerrisdale’s report highlights BitMine’s aggressive stock issuance pace. The company raised over $10 billion in the past three months through at-market share sales.
This equals roughly $170 million in new stock issued each day. Kerrisdale argues this rapid dilution has created investor exhaustion.
The short seller claims investors now anticipate that every stock price rally will trigger additional share offerings. This pattern has allegedly made the market less receptive to BitMine’s equity sales.
A September stock offering worth $365 million received particular scrutiny. BitMine management described the transaction as “materially accretive” to existing shareholders.
Kerrisdale disputed this characterization. The firm labeled it “a discounted giveaway” when accounting for attached warrants that provide additional purchase rights.
Premium Compression and Leadership Questions
BitMine currently holds 2.83 million ETH worth more than $12.5 billion. Kerrisdale calculates this represents about 9 Ether per 1,000 shares.
The premium investors pay for BitMine stock versus its net asset value has narrowed. This multiple dropped from over 2.0x in August to 1.2x by September.
Kerrisdale compared executive chair Tom Lee to Strategy’s Michael Saylor. The report states Lee lacks the following that allows Saylor to issue billions in stock while maintaining investor enthusiasm.
Growing Competition in Crypto Treasury Space
The market for crypto treasury companies is expanding rapidly. US-listed firms pursuing similar strategies plan to raise over $100 billion in capital this year.
This increased competition could pressure companies to maintain premium valuations. More players using the same approach typically compresses margins and price multiples.
Kerrisdale emphasized its short position targets BitMine’s business model rather than Ethereum itself. The firm believes investors should avoid paying premiums for ETH exposure through stock.
The report recommended buying Ethereum directly on exchanges, staking tokens for yield, or purchasing ETH through exchange-traded funds. These alternatives avoid both the stock premium and ongoing dilution from share issuances.
Kerrisdale has previously published short reports on other crypto companies. Past targets include Bitcoin miner Riot Platforms and Bitcoin treasury firm Strategy.
BitMine did not immediately respond to requests for comment on Kerrisdale’s report. The stock continued gaining 0.4% in after-hours trading following the Tuesday close.
