The price of Riot Platforms (RIOT -13.44%) stock cooled on the first trading day of the week, on the back of a sliding Bitcoin (BTC -4.05%) price and news of a fresh round of capital-raising by the cryptocurrency miner. Riot closed the day 14% lower in price, comparing unfavorably to the relatively mild (0.6%) decline of the benchmark S&P 500 (^GSPC -0.61%).
Bitcoin in retreat
Several days ago, the crypto world was watching breathlessly as Bitcoin teased the fabled $100,000 mark. It finally crashed through that barrier, and then… the excitement started to melt away. Since then, the price has retreated to under that level, casting some gloom throughout the cryptoverse. Bitcoin remains the 300-pound gorilla of this asset class, and any altcoin or company heavily associated with it tends to move in concert with its price.
What compounded this for Riot on Monday was its announcement that it aims to raise $500 million in new capital. This is to be done through a private placement of convertible senior notes that come due on Jan. 15, 2030. The company added that it expects to grant the initial buyers of the securities — which can convert to equity under certain conditions — an option to purchase up to a collective $75 million worth of the notes.
Riot added that it intends to use its proceeds from the issue to acquire more Bitcoin and for unspecified “general corporate purposes.”
Money well spent?
For Bitcoin-associated entities, timing is crucial for fundraising efforts. Convertible note issues have been all the rage lately, and several experienced robust demand when Bitcoin was ascending to $100,000. Yet now that it’s trading off those highs, many investors clearly don’t believe raising millions of dollars in debt and/or equity to buy more is a clever idea now.
I don’t feel Riot should be punished so severely for this. After all, its mission is to mine and buy cryptocurrency, and it’s only using a common instrument to facilitate this. Perhaps this opens the possibility of snapping up this prominent mining stock at a discount.
