Shares of Riot Blockchain (NASDAQ:RIOT), a company that mines popular cryptocurrency Bitcoin, soared on Wednesday. This is partly due to Bitcoin itself being up. As of 3:45 p.m. EDT, the price of Bitcoin had increased 10% over the previous 24 hours, according to CoinDesk. But Riot Blockchain did have news of its own to report, which may play a roll in explaining why the stock was up about 12%.
According to yesterday's filing with the Securities and Exchange Commission (SEC), Riot Blockchain is selling 2.2 million shares of Coinsquare to Mogo (NASDAQ:MOGO) in exchange for 2.3 million shares of Mogo. Coinsquare is a cryptocurrency exchange based in Canada, whereas Mogo is a fintech company. The deal was previously announced. But the latest SEC filing disclosed that the first payment of Mogo stock went through on June 4.
Riot Blockchain is scheduled to receive the next batch of Mogo stock in one month and the final payment in two months. As of April, there were 56.8 million shares of Mogo outstanding, meaning Riot Blockchain owns just a small portion of the company. Therefore, I wouldn't expect Riot Blockchain stock to fluctuate too much based on what Mogo stock is doing.
It's far more likely that Riot Blockchain will continue to be a volatile stock because of Bitcoin. Volatility is a risk for short-term traders because it's hard to predict which way a stock will move. That's why we try to focus more on the business over the long haul. If Riot Blockchain can keep costs low and increase its market share of mining Bitcoin, and if the price of Bitcoin continues to rise significantly, then it's possible the stock plays out well for investors over the long term.