The price of Riot platforms (NASDAQ:RIOT) Stocks cooled on the first trading day of the week, following a decline Bitcoin (CRYPTO: BTC) price and news about a new round of capital increase by the cryptocurrency miner. Riot ended the day 14% lower in price, unfavorable compared to the benchmark’s relatively mild (0.6%) decline S&P500 (SNPINDEX: ^GSPC).
A few days ago, the crypto world watched breathlessly as Bitcoin teased the legendary $100,000 mark. Finally it crashed through that barrier, and then…the excitement started to fade away. Since then, the price has retreated below that level, casting some gloom in the cryptoverse. Bitcoin remains the 300-pound gorilla of this asset class, and any altcoin or company strongly associated with it tends to move with its price.
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What made this worse for Riot on Monday was the announcement that the company is looking to raise $500 million in new capital. This is to be done through a private placement of convertible senior notes due January 15, 2030. The company added that it expects to give initial purchasers of the securities – which can be converted into shares under certain conditions – an option to purchase a combined $75 million worth of notes.
Riot added that it plans to use the proceeds from the issuance to acquire more Bitcoin and for unspecified “general corporate purposes.”
For Bitcoin-associated entities, timing is crucial for fundraising. Issuing convertible notes has been all the rage lately, and several experienced strong demand as Bitcoin rose to $100,000. But as it trades off these highs, many investors clearly don’t believe raising millions of dollars in debt and/or equity to buy more is now a smart idea.
I don’t think Riot should be punished so severely for this. After all, the company’s mission is to mine and buy cryptocurrency, and it only uses a common tool to facilitate this. Perhaps this opens up the opportunity to buy these prominent mining stocks at a discount.
If our analyst team has a stock tip, it could be worth listening to. After all, Stock Advisors the total average return is 939% – a market-shattering outperformance compared to 179% for the S&P 500.*
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*Stock Advisor returns December 9, 2024
