Activist Investor Pushes Riot Platforms to Diversify Business Model

Starboard Value Takes Stake in Bitcoin Miner, Seeks Changes

Activist investor Starboard Value has made a significant investment in Riot Platforms (RIOT), a leading bitcoin miner, and is pushing the company to diversify its business model, according to a report by The Wall Street Journal.

Riot’s Current Business Model

Riot is currently a “pure-play” bitcoin miner, generating revenue solely from mining bitcoin. This is in contrast to some of its peers, such as Core Scientific (CORZ), which has dedicated a significant portion of its facilities to high-performance computing (HPC) and artificial intelligence (AI) computing.

Starboard’s Proposal

Starboard is urging Riot to convert some of its bitcoin mining sites into data centers that can host machines for high-performance computing, enabling big tech companies to use the facilities for their own purposes. This move would allow Riot to diversify its revenue streams and reduce its dependence on the volatile bitcoin mining market.

Riot’s Response

Riot has responded to Starboard’s proposal, stating that it regularly engages with its shareholders and values their feedback. The company has also welcomed Starboard’s input and is committed to creating value for all shareholders through constructive dialogue.

The Industry’s Shift

The bitcoin mining industry has faced significant challenges in recent years, including a profit squeeze following the bitcoin halving earlier this year. As a result, many miners have been forced to look for ways to diversify their revenue streams. Core Scientific’s decision to sign a multi-billion dollar deal with a hyperscaler – a firm operating large-scale data centers for cloud computing and AI – has been seen as a game-changer for the industry, bringing large investors back into the sector.

Riot’s Potential

Riot has not been completely opposed to the trend of diversifying its revenue streams. The company’s CEO, Jason Les, has stated that it is considering deals with large tech companies. However, it has not announced any significant deals to date, unlike some of its peers.

Competition

Other bitcoin miners, such as Galaxy Digital and Hut 8, have also been exploring opportunities in the HPC and AI sectors. Galaxy Digital has signed a non-binding deal with a U.S.-based hyperscaler firm to turn all its 800 megawatts of mining capacity into hosting high-performance computers. Hut 8 has seen its shares surge after announcing that it had received interest from a trillion-dollar hyperscaler firm and Facebook owner Meta Platforms (META).

Impact on Riot’s Stock

Riot’s stock rose as much as 11% in early trading following the news, and was higher by 6% at press time. The shares have fallen nearly 30% this year, while CoinShares Valkyrie Bitcoin Miners ETF (WGMI) rose 40%.

Conclusion

Riot Platforms’ decision to diversify its business model and explore opportunities in the HPC and AI sectors could be a game-changer for the company and the industry as a whole. With Starboard Value’s support, Riot may be able to reduce its dependence on the volatile bitcoin mining market and create new revenue streams. However, the company will need to carefully consider its options and weigh the potential risks and benefits of diversification.

FAQs

Q: What is Starboard Value’s proposal for Riot Platforms?
A: Starboard Value is urging Riot to convert some of its bitcoin mining sites into data centers that can host machines for high-performance computing, enabling big tech companies to use the facilities for their own purposes.

Q: Why is Riot’s current business model considered “pure-play”?
A: Riot’s current business model is considered “pure-play” because it generates revenue solely from mining bitcoin, unlike some of its peers that have diversified their revenue streams into other areas such as HPC and AI computing.

Q: What is the significance of the bitcoin halving?
A: The bitcoin halving, which occurred earlier this year, slashed mining profitability, leading to a profit squeeze in the industry. This has forced many miners to look for ways to diversify their revenue streams.

Q: What is a hyperscaler?
A: A hyperscaler is a firm operating large-scale data centers for cloud computing and AI. Core Scientific’s deal with a hyperscaler has been seen as a game-changer for the industry, bringing large investors back into the sector.

Q: What is Riot’s current stock performance?
A: Riot’s stock has fallen nearly 30% this year, while CoinShares Valkyrie Bitcoin Miners ETF (WGMI) rose 40%. The stock rose as much as 11% in early trading following the news.