The most popular "Ethereum treasury" is under short attack, with its business model targeted by Kerrisdale.
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BitMine Immersion Technologies, a company that has drawn much attention by transforming itself into the largest public holder of Ethereum, is now facing a stern challenge from short sellers.
Renowned short-seller Kerrisdale Capital released a report on Wednesday announcing it had shorted BitMine's stock, claiming that the Tom Lee-led company is "chasing an almost extinct model." The core argument of the report is that BitMine's strategy of issuing shares at a premium to acquire Ethereum and thus increase per-share token holdings is no longer effective.
Kerrisdale believes that as BitMine's valuation premium over its crypto assets narrows, the attractiveness of its business model is waning. The firm also criticized BitMine’s frequent stock issuances, saying this has led to "investor fatigue."
Following the release of the report, BitMine's stock experienced severe volatility on Tuesday. The stock opened above $60, but in early trading fell over 5% to an intraday low of $57.41. However, sentiment then reversed, and the stock eventually closed up 1.35% at $60.
In July this year, the company's stock peaked at $130 per share but has since nearly halved. Year to date, BitMine’s stock is up 17,042%.
The narrowing premium “token buying” model
Earlier this year, BitMine transformed from a bitcoin mining company, adopting an aggressive Ethereum acquisition strategy and rapidly becoming the token’s largest public holder. According to Kerrisdale's report, the company currently holds 283 million Ethereum, worth over $12.5 billion, with every 1,000 shares corresponding to about 9 Ethereum. BitMine is one of dozens of "crypto treasury companies" that aim to attract investor attention by buying substantial amounts of crypto assets.
Kerrisdale’s main attack centers on the sustainability of this model. The short report argues that BitMine’s approach of selling stock at a premium to buy Ethereum is losing effectiveness as the valuation premium over the company's net crypto asset value narrows. The report states that as the premium of its Net Asset Value Multiple (mNAV) dropped from above 2.0x in August to 1.2x in September, the foundation of this model is being shaken.
Kerrisdale also heavily criticized BitMine’s pace of stock issuance in the report. It pointed out that in the past three months, the company mainly raised $10 billion through at-market stock offerings. Kerrisdale stated:
“The absolute pace of BMNR's stock issuance has already turned early enthusiasm into fatigue, and investors habitually expect that any rally will face more supply.”
The report further cited BitMine’s $365 million stock offering in late September as a “discount giveaway," calling it "a cleverly packaged dilutive financing that sacrificed long-term credibility for short-term cash."
Leadership and disclosure under question
Kerrisdale’s report also targeted BitMine’s Executive Chairman Tom Lee. The report claimed that although Tom Lee “brought visibility” to the company, he “does not have the ‘cult-like’ following of (Strategy’s chairman) Michael Saylor,” the latter being able to issue billions in stock without losing investor enthusiasm.
Kerrisdale believes BitMine’s strategy requires “scarcity, charismatic leadership, and possibly something more innovative than at-market issuance,” but the company has “provided none of these.” Additionally, the report accused BitMine of less transparent disclosures, stating that as growth has slowed, the company has stopped reporting per-share Net Asset Value (NAV)—a key metric.
Kerrisdale stated that its short position in BitMine is “not a bet against Ethereum itself but rather against the notion that investors should still pay a market premium for it." The report claims BitMine’s selling point is its promise of delivering more value than direct holding of tokens, but in reality, the strategy is not unique, competition is intensifying, and disclosure is becoming less transparent:
“If you want Ethereum, just buy it directly, stake it with minimal friction, or hold it in the rapidly growing ETFs.”
Kerrisdale previously targeted other crypto companies, including bitcoin miner Riot Platforms and bitcoin-buying company Strategy. At the time, Riot rebutted Kerrisdale’s report in Cointelegraph, calling its conclusions “unreasonable.”
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