Please ensure Javascript is enabled for purposes of website accessibility

Why Riot Blockchain Stock Is Soaring... Again

By Jordan Wathen – Dec 19, 2017 at 1:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the cryptocurrency company soared on news it was raising capital.

What's happening?

Shares of Riot Blockchain (RIOT 9.67%) are up 15% as of 12:00 p.m. EST after the company announced it raised a fresh round of capital by selling stock and warrants in a private placement. A capital raise gives Riot Blockchain some semblance of legitimacy as it takes heat from high-profile short-sellers, including Andrew Left of Citron Research.

So what

Riot Blockchain announced agreements to sell approximately 1.64 million units to investors for $22.50 each. Each unit entitles the buyer to one share of Riot Blockchain, plus one three-year warrant for one share of stock that can be exercised at a price of $40 per share. Warrants are similar to long-dated call options in that they allow investors to acquire shares of a company at a later time at a set price.

$5 bills wrapped with a rubber band.

Image source: Getty Images.

Riot's raise comes at a deep discount to closing prices on Dec. 18, 2017. We can roughly triangulate the value of each unit it sold based on closing prices for its common stock and June 2018 calls at a $40 strike, which (very) roughly approximate the value of a three-year warrant.

The table below shows my calculations.

Security or Derivative

Value as of Dec. 18 Close

Common stock

$36.47

June 2018 calls at $40 strike 

$7.50

Approximate value of Riot units

$43.97

Source: Author calculations. 

Now what

In ordinary markets, investors might be disappointed that a company is raising money by selling units worth approximately $44 each for $22.50, before any fees it pays to its investment bankers. Of course, bitcoin stocks seem to operate in some new world where any news is interpreted as good news.

Riot Blockchain said the proceeds would be used for the expansion of its bitcoin mining operations, strategic investments, and general working capital. Riot currently owns 1,200 bitcoin mining rigs. Among other investments, Riot Blockchain also owns stakes in Coinsquare, an online bitcoin exchange, and Verady, a company that provides audit and accounting services for cryptocurrency assets.

Jordan Wathen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Riot Blockchain, Inc Stock Quote
Riot Blockchain, Inc
RIOT
$4.65 (9.67%) $0.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.