Kerrisdale Capital sells Riot stock amid complaints about safety risks for miners, imports from China
Kerrisdale Capital sent a complaint to Texas officials about cryptocurrency miner Riot Platforms over concerns related to safety risks and equipment imported from China.
The company filed its complaint in a June 5 letter to Navarro County Texas Judge HM Davenport Jr. and four commissioners.
Kerrisdale cited a former operations expert at Riot’s Rockdale facility who described hazardous spills, unsafe electrical equipment and lack of use of protective equipment.
Former employees said management did not care about their safety concerns.
Kerrisdale noted that in 2022, Riot used ExxonMobile’s Spectrasyn 2C as an immersion coolant. This product is not listed by ExxonMobile for use in data centers.
ExxonMobile has since released products for data centers and urged officials to check what coolants Riot is currently using at its Rockdale and Corsicana centers.
The US manufacturing claim is questionable.
Kerrisdale also raised concerns about a $453 million purchase agreement for mining equipment from Chinese manufacturer MicroBT.
Riot has reportedly argued that the purchase will create jobs because the Pennsylvania facility will manufacture mining devices. But images obtained by Kerrisdale show that the U.S. facility assembled parts imported from China.
Kerrisdale added that MicroBT’s U.S. manufacturer, Synos Corp., is highly automated and has little room for highly skilled employees. MicroBT claimed it was primarily seeking to circumvent import tariffs through Synos rather than employing U.S. workers.
Kerrisdale disclosed a conflict of interest on the whole matter, saying he had taken a short position in Riot stock and would realize a profit if Riot stock fell in value.
texas energy grid
In a separate investment report, Kerrisdale criticized Bitcoin mining more broadly, calling it “one of the worst business models” and asserting that Riot has never generated positive cash flow.
The company also commented on the mine’s impact on the Texas power grid:
“We believe riot investors are unaware of changes in state and local politics and headline risks as we approach another summer that will test Texas’ fragile power grid.”
Kerrisdale linked to a Dallas Morning News report that linked increased summer demand to air conditioning use. Prices are expected to rise in the summer.
Texas was the subject of another mining and energy-related issue earlier this year. Last February, the Texas Blockchain Council (TBC) and Riot challenged an executive order requiring mining companies across the U.S. to report their energy use in detail.
Government agencies largely suspended their investigations until March.
