Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Riot Blockchain Stock Is Going Up and Down Today

By Jon Quast - Apr 13, 2021 at 11:35AM

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

Bitcoin is up, but this research firm says the stock is worth closer to $2 per share.

What happened

Shares of cryptocurrency miner Riot Blockchain (RIOT -10.27%) were seeing volatility on Tuesday morning. The stock was up 7% as of 10:30 a.m. EDT. It's trading higher because Bitcoin (BTC -7.82%) hit an all-time high today. But Riot Blockchain is having a hard time staying up, perhaps because of something said by a former short-seller. 

So what

Right before 8 a.m. EDT, the price of Bitcoin surpassed $63,000 for the first time, according to CoinDesk. For perspective, it was at about $6,800 at this time last year. Riot Blockchain is mining almost 200 Bitcoins per month according to an update for investors yesterday. Furthermore, the company's holding 1,565 Bitcoins currently -- worth almost $100 million and rising as the price of Bitcoin goes up. This is why the stock is up today.

A businessman draws an exponential growth curve on a line graph.

Image source: Getty Images.

However, Riot Blockchain has a market capitalization of $4.6 billion and some investors think that's too much. Citron Research has decided to not publish short reports anymore, but it rose to prominence thanks to its past short positions. Today, Citron took to social media to say that Riot Blockchain stock should trade in line with its net asset value (NAV), which it estimates at $2 per share. The stock pulled back from highs in the minutes following the post from Citron.  

Now what

On one hand, Citron Research makes a fair point. Consider that Riot Blockchain held 1,078 Bitcoins on Dec. 31, 2020. It mined 491 Bitcoins in the first quarter and currently holds 1,565, implying it only sold four Bitcoins in Q1. This means the company is largely funding operations through financing and primarily mining Bitcoin in order to hold. Therefore it's reasonable to value the company based on its assets. 

On the other hand, Citron compared Riot Blockchain's valuation to that of Bitcoin funds like Grayscale Bitcoin Trust. That seems like an apples-to-oranges comparison to me. Riot Blockchain is increasing its mining capabilities throughout 2021 and beyond. Therefore, assuming the price of Bitcoin stays the same, the company's net asset value is poised to increase from here. For this reason, it doesn't seem fair to value the company based on a static NAV like you would something like Grayscale Bitcoin Trust.

In summary, what Riot Blockchain is worth is up for debate, as today proves. But it's probably more than the $2 per share implied by Citron Research.

Jon Quast owns shares of Bitcoin. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 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
$7.43 (-10.27%) $0.85
Grayscale Bitcoin Trust (BTC) Stock Quote
Grayscale Bitcoin Trust (BTC)
GBTC
$13.37 (-7.70%) $-1.11
Bitcoin Stock Quote
Bitcoin
BTC
$21,545.89 (-7.82%) $-1,826.65

*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
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

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.