Activist investor Starboard Value has recently made a significant investment in bitcoin miner Riot Platforms (RIOT) and is advocating for changes in the company’s business model, as reported by The Wall Street Journal. Starboard is urging Riot to transform some of its bitcoin mining sites into data centers capable of hosting machines for high-performance computing (HPC) for major tech companies. Currently, Riot operates solely as a bitcoin miner, deriving all of its revenue from mining bitcoin, unlike competitors such as Core Scientific (CORZ), which has diversified its facilities to include HPC and artificial intelligence computing.
In response to Starboard’s suggestions, a spokesperson for Riot stated, “Riot regularly engages with our shareholders and values their feedback. We have had discussions with Starboard on multiple occasions and appreciate their input. We are dedicated to creating value for all shareholders and anticipate productive discussions with Starboard on strategies to achieve this common objective.”
Historically, publicly traded mining companies were a popular means for institutional investors to gain exposure to bitcoin. However, the industry suffered a significant downturn during the 2022 crypto winter, causing stock prices to plummet. Following the bitcoin halving earlier this year, mining profitability decreased, prompting miners to explore new revenue streams. Core Scientific’s partnership with a hyperscaler marked a turning point, reigniting investor interest in the sector.
While some mining firms, like Riot, have shown openness to diversifying into HPC computing, they have yet to make concrete moves in that direction. This hesitance has resulted in underperformance compared to peers who have embraced AI and HPC partnerships. Starboard’s involvement signifies a shift as a traditional activist investor is now advocating for a publicly traded miner to expand into data centers.
Although Riot’s CEO, Jason Les, has indicated the company’s interest in collaborating with tech giants, no official announcements have been made. In contrast, other miners, such as Galaxy Digital and IREN, have secured deals with hyperscalers to transition their mining capacities into hosting high-performance computers. Hut 8 has also been rumored to be working on a data center project with Meta Platforms.
Following news of Starboard’s involvement, Riot’s stock surged by 11% in early trading on Thursday, eventually settling at a 6% increase. Despite a 30% decline in share value this year, Riot’s potential pivot towards data centers has garnered positive investor sentiment. In comparison, the CoinShares Valkyrie Bitcoin Miners ETF has seen a 40% rise in the same period.
Overall, Starboard’s investment in Riot signifies a potential shift in the mining industry towards diversification and collaboration with tech companies, setting the stage for a new chapter in the evolving landscape of bitcoin mining.