Why Riot Blockchain stock popped this week
What happened
Shares of Riot Blockchain (RIOT 8.76%) rose as much as 26.3% this week, according to data from S&P Global Market Intelligence. The cryptocurrency miner gave an update on its operations for December and announced a surprise name change. As of 3:30 PM EST on Thursday, January 5th, the stock is up 23.3% this week.
So what
On January 4, Riot Blockchain provided an update on its operations for the month of December. The Bitcoin miner produced 659 coins for the month, up 55% year-over-year, and sold 600 Bitcoin for a total price of $10.2 million.
The impressive growth numbers may have made investors optimistic about the company, as shares of the stock rose on the news. But just because the company is mining more Bitcoin doesn’t mean it’s making money. Last quarter, the company had an operating loss of 40 million dollars and has lost 354 million dollars through the first nine months of this year. Unless the price of Bitcoin rises – and quickly – Riot Blockchain will lose a lot of money.
Shares of Riot Blockchain can also trade so violently in the last trading days because of the high short interest on the stock. Short interest means the total amount of a stock’s listed shares borrowed by short sellers. Riot Blockchain has a short interest of about 20%, which is quite high. When a heavily shorted stock rises, it can cause short sellers to buy back their shares, driving the share price further up in what is known as a short squeeze. This could have happened to Riot Blockchain this week.
In other news, management also announced this week that it’s changing its name to Riot Platforms, although it’s unclear if anything actually changes with the underlying business.
What now
Investors should stay far away from Riot Blockchain (or whatever they decide to call themselves), no matter how high or low the price goes. Honestly, this is just a highly promotional penny stock trying to latch on to new trends to pump up its own stock. If you look at the price chart, it did this in 2007, 2018, and most recently in 2021. For a short period of time, shares of the stock rose, but any long-term shareholder has seen the vast majority of the money put into Riot Blockchain shares disappear.
There’s no reason to think this time will be any different. Avoid buying Riot Blockchain shares.
Brett Schafer has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
