Bitcoin mining giant Riot Platforms may be sitting on a gold mine, one that has yet to be fully tapped. Starboard, one of the most active investors in the U.S. stock market, has taken a massive position in the company, and according to them, Riot could transform itself by shifting its focus to hyper-demand.
Riot owns and operates massive Bitcoin mining facilities across Central Texas and Kentucky and runs a robust electrical engineering division out of Denver.
While the company owns 16,728 Bitcoin and boasts a mining infrastructure of over 1 gigawatt (GW) capacity, it has underperformed on the stock market, seemingly creating an argument for Starboard’s intervention.
Riot's Performance by the Numbers – and Why Starboard Cares
At $11.55 per share and a market valuation of $3.97 billion, Riot Platforms is no small fish. But this year has been brutal. Bitcoin is up 130%, but Riot’s stock is down 24%, far behind competitors that have posted triple-digit gains.
This poor performance points to serious problems with operations and leadership. Starboard is not known for sitting quietly when there is potential to make the company profitable.
With 155 active campaigns under its belt and an average return of 23.27% on those campaigns, the existence of Starboard alone tells us that Riot may have to make some big changes.
The numbers don’t lie. Riot spent $225 million on selling, general, and administrative (SG&A) costs this year — more than triple the $67 million it spent in 2022.
Much of this expense comes from executives who reward themselves with stock-based compensation, accounting for 11.5%, 9.5%, and 32.12% of total revenue over the past three years. Despite this, Riot’s management has produced nothing but losses, with operating losses this year soaring to $304 million, the worst ever.
The company’s corporate governance is equally fragile. A five-member overlapping board, instances of favoritism, and questionable leadership decisions have left Riot with the highest energy and SG&A costs for every Bitcoin mined.
Starboard is an investment company, so it’s just here to make money. Its plan for Riot is to enter the hyperscaler market. Hyperscalers are cloud computing giants — like Amazon Web Services, Microsoft Azure, and Google Cloud — that run massive data centers to support AI and high-performance computing (HPC).
These companies are in desperate need of infrastructure, and Bitcoin mining facilities like Riot are a perfect fit. Starboard points out that Riot already has the goods. Its Rockdale, Texas, site is the largest Bitcoin mining facility in North America, with a capacity of 700 megawatts.
The Corsicana, Texas, facility, which is slated to have a capacity of 1 gigawatt when completed, now has 400 megawatts ready. These facilities share key features with the needs of hyperscalers: high-performance computing infrastructure, access to renewable energy, and scalability.
Competitors have already seized the opportunity. Core Scientific, another Bitcoin mining company, has signed a deal with CoreWeave, an Nvidia-backed AI data center startup, to lease 500 megawatts of capacity. The deal is worth $8.7 billion over 12 years and offers profit margins of 75-80%, far better than Bitcoin mining margins.
Core Scientific’s stock surged 40% the day after the deal was announced and is up 220% this year. Riot could make a similar profit. Leasing the 600 megawatts of unused power in Corsicana could bring in $600 million a year, nearly double its current revenue of $313 million.
If Riot were to convert its entire 1.1 GW of capacity in Rockdale and Corsicana to hyperscale, those numbers could triple. Better yet, it’s clear that hyperscalers often cover the cost of building or upgrading these facilities.
But Riot isn’t completely blind to its options. The company recently spent $510 million buying Bitcoin on the open market, funded by convertible senior notes. This indicates a desire to hold more Bitcoin without expanding mining capacity.
But Starboard’s plan offers a better path: using Hyperscaler revenue to fund Bitcoin purchases, creating a cycle of cash flow and asset accumulation. A micro-strategy of sorts.