A new short-seller report has been released on BitMine Immersion Technologies, Inc. (BMNR), one of the largest Ethereum Digital Asset Treasury (DAT) companies. The report argues that investors no longer have a reason to pay a premium for indirect crypto investment vehicles like BMNR.
The report, published by Kerrisdale Capital, a well-known activist short-selling firm, states that it holds a short position in BMNR stock.
BMNR’s Vicious Cycle of Dilution
Kerrisdale Capital was founded by Sahm Adrangi in 2009. The firm is famous for its critical research reports on “overvalued” or “problematic” companies, which have often significantly impacted the market.
Kerrisdale’s report claims that BMNR is imitating a strategy once successfully used by MicroStrategy (MSTR). The core of this strategy is to increase ETH per share by issuing new shares at a premium to the company’s Net Asset Value (NAV), raising capital, and then using those funds to purchase more Ethereum.
However, Kerrisdale argues that this model is no longer working, as the scarcity and “meme” enthusiasm that once drove MSTR’s premium have faded. Indeed, MSTR’s premium (mNAV) has recently fallen from 2.0x–2.5x to less than 1.5x.
In this environment, BMNR has issued over $10 billion in new shares in just three months. While its total ETH holdings have continued to increase, the growth rate of ETH-per-share has slowed significantly. BMNR’s mNAV premium plummeted from over 2.0x in August to around 1.2x a month later.
Kerrisdale also accused BMNR of becoming less transparent in its disclosures as its “flywheel” began to slow down. Since August 25, BMNR has subtly excluded its updated share count and NAV-per-share figures from its weekly press releases.
Kerrisdale interprets this as BMNR hiding the metrics it once used to prove its growth as its per-share growth slows down. According to them, this has nothing to do with Ethereum’s intrinsic value. The firm predicts that the NAV premium for many DAT companies, including BMNR, will continue to collapse. This is because crypto regulations are easing, and direct investment is becoming easier.
Contrary: Wood and Thiel Remain Bullish
Despite this bearish view, there is a strong counter-argument that BMNR has a bright future. Prominent investors believe its crypto-centric strategy and aggressive ETH accumulation are innovative.
Peter Thiel, a famous Wall Street investor and early BMNR investor, has disclosed a 9.1% stake in the company. ARK Invest, a fund known for its focus on tech stocks led by Cathie Wood, currently holds 6,456,242 shares (3.61%) of BMNR.
Wood is known to be bullish on BMNR’s aggressive ETH accumulation strategy. She has also publicly emphasized the long-term value of ETH. Her fund recently purchased over 54,000 additional shares of BMNR in October.
BMNR’s stock price, which had climbed past $63.00 on Tuesday, saw a minor drop after the Kerrisdale Capital short report was released, and closed at $60.00 per share on Wednesday.
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