BitMine Immersion Technologies' stock price closed slightly higher after experiencing a volatile trading day, following the news that the cryptocurrency treasury company has become the latest target of short-selling firm Kerrisdale Capital.
Kerrisdale stated in a report on Wednesday that Tom Lee's BitMine is "chasing a soon-to-disappear model," and the firm has taken a short position against the company, betting that its stock price will decline.
Kerrisdale believes that BitMine's strategy of selling stock at a premium to purchase Ethereum (ETH) and boost its per-share token metrics is no longer effective, as the company's value relative to its cryptocurrency holdings is shrinking.
BitMine is a Bitcoin (BTC) mining company that changed its strategy earlier this year to begin acquiring large amounts of ETH, and it has now become the largest public holder of the token. Kerrisdale estimates that BitMine holds 9 Ethereum for every 1,000 shares, with a total of 2.83 million ETH valued at over $12.5 billion.
It is one of dozens of cryptocurrency treasury companies that are buying large amounts of cryptocurrency in hopes of attracting investor attention.
BitMine did not immediately respond to a request for comment.
Investors were initially indecisive, with the stock opening above $60, but after the Kerrisdale report was released, it fell more than 5% in early trading to a low of $57.41. However, BitMine (BMNR) closed up 1.35% at $60 on Tuesday, continuing to rise 0.4% in after-hours trading.
Kerrisdale has previously targeted other cryptocurrency companies, including Bitcoin mining firm Riot Platforms and Bitcoin purchasing company Strategy.
At that time, Riot dismissed Kerrisdale's report, telling Cointelegraph that the report reached "unreasonable conclusions." Strategy did not directly respond to the short report, but Chairman Michael Saylor has long touted the company's appeal to investors.
In the report, Kerrisdale also criticized BitMine's pace of stock issuance, noting that the company raised $10 billion primarily through market stock sales over the past three months.
"The astonishing speed of BMNR's stock issuance has turned early enthusiasm into fatigue, and investors have become accustomed to believing that every rebound will encounter more supply," Kerrisdale stated.
The firm described BitMine's $365 million stock issuance at the end of September as a "discount giveaway," and believes the transaction is "a cleverly packaged dilutive financing that sacrifices long-term credibility for short-term cash."
Kerrisdale also criticized BitMine's Executive Chairman Lee, claiming that while he has "brought visibility" to the company, "he does not have the fervent following like Michael Saylor, who has become a meme stock idol capable of issuing billions in equity without losing investor enthusiasm."
The firm added that BitMine's strategy requires "scarcity, charm, and something potentially more innovative than market stock issuance," but claimed that the company "has not provided any of these."
Kerrisdale also criticized other areas of BitMine's business, claiming that as growth slows, the company has stopped reporting its net asset value (NAV) per share, with its NAV multiple (mNAV) premium dropping from over 2.0 times in August to 1.2 times in September.
"BMNR's pitch is based on the idea that it can provide more value than simply holding tokens alone," the firm wrote. "However, the strategy is generic, competition is surging, disclosures have become opaque, per-share ETH growth is slowing, and what is marketed as 'premium' capital raising is actually dilutive."
The company stated that its short position against BitMine "is not a bet against Ethereum itself, but against the notion that investors should still pay a market premium for it."
"If you want ETH, buy it directly, stake it with minimal friction, or hold one of the rapidly growing ETFs," the firm argued.
Related: Consensys Founder: Ethereum (ETH) Digital Asset Treasury Will Be the Next Berkshire Hathaway
Original: “BitMine Stock Choppy After Kerrisdale Short Seller Report”
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