Riot Platforms, one of North America’s largest Bitcoin miners, is under pressure to rethink its business strategy.
Activist investor Starboard has made a significant move, arguing that the company could unlock far greater potential by leasing its unused capacity to tech giants like Amazon Web Services and Google, instead of sticking with its current Bitcoin mining operations. With more than 600 megawatts (MW) of idle capacity and rising costs, the company is at a crucial juncture.
Struggling Despite Bitcoin’s Surge
While Bitcoin has enjoyed a remarkable 130% price increase this year, Riot’s stock has been on the decline, dropping 24%. At $11.55 per share and a market value of $3.97 billion, Riot’s performance is a stark contrast to other players in the space, who have capitalized on Bitcoin’s growth.
Riot’s financial struggles go beyond stock performance. The company posted a record $304 million operating loss this year, alongside a staggering $225 million in selling, general, and administrative (SG&A) costs—more than triple what it spent in 2022. A significant portion of these costs comes from executive compensation, with Riot’s management taking a hefty chunk of the revenue in stock-based rewards, amounting to as much as 32% in some years.
Starboard’s Bold Proposal
Starboard, known for its track record of forcing change in underperforming companies, has set its sights on Riot’s underutilized infrastructure. The activist investor believes that Riot’s vast mining facilities could be better leveraged by leasing out capacity to hyperscalers—large companies like Amazon, Microsoft, and Google that run massive data centers for cloud computing and artificial intelligence.
Riot’s flagship facility in Rockdale, Texas, is the largest Bitcoin mining site in North America, with 700 MW of capacity. Its Corsicana, Texas site, currently with 400 MW available, is set to expand to 1 gigawatt (GW) when completed. According to Starboard, leasing the 600 MW of unused capacity at Corsicana could generate $600 million annually—almost doubling Riot’s current revenue. If the company fully converted its 1.1 GW of capacity across both sites, those numbers could triple.
A Proven Strategy in the Industry
Riot wouldn’t be the first Bitcoin miner to make this pivot. Competitors like Core Scientific have already tapped into the hyperscaler market, securing an $8.7 billion deal with AI startup CoreWeave to lease 500 MW of its capacity. The deal, which offers profit margins of 75-80%, has already paid off, with Core Scientific’s stock jumping 40% after the announcement and climbing 220% year-to-date.
Similarly, Hive Digital and Hut 8 have embraced the hyperscaler model, with both companies posting impressive year-to-date stock returns of over 100%. Riot, on the other hand, is down 3.4%.
Riot’s Next Move
Though Riot has recently spent $510 million buying Bitcoin on the open market, Starboard’s proposal offers a more strategic way forward. Instead of solely focusing on mining, Riot could use the hyperscaler revenue to fund Bitcoin purchases, creating a sustainable cycle of growth For Riot, the shift toward leasing capacity could be the key to staying competitive and reversing its fortunes.
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