Analysts from H.C. Wainwright support Riot’s acquisition of Block Mining, viewing the $92.5 million deal as a strategic
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move to improve its hash rate and expand its mining capacity.
Points
- Riot’s acquisition of Block Mining involves $18.5 million in cash and $74 million in Riot common stock.
- Analysts believe the acquisition cost is justified due to Block Mining’s capacity and expansion potential.
- The acquisition will add 1 EH/s to Riot’s portfolio and expand operations to over 300 MW.
- Riot’s strong liquidity position supports the substantial investment.
Analysts at H.C. Wainwright have praised Riot Platforms’ recent acquisition of Block Mining, a strategic move aimed at enhancing Riot’s hash rate and expanding its mining operations. The acquisition, valued at $92.5 million, comprises $18.5 million in cash and $74 million in Riot common stock, with an additional earn-out consideration of up to $32.5 million contingent on achieving specific milestones.
Strategic Acquisition Details
Riot Platforms’ CEO, Jason Les, highlighted the acquisition’s strategic importance, stating, “With a combined 60 MW of existing developed capacity, and a pipeline to rapidly scale to over 300 MW, this acquisition expands our operations and further enhances our path towards our growth target of 100 EH/s.” The deal includes two data centers in Kentucky: the Commerce Drive data center in Paducah, operating at 35 MW, and the Blue Steel site in Calvert City, utilizing 7 MW with an 18 MW vacancy.
Justification for Acquisition Cost
Despite the high price tag, analysts at H.C. Wainwright believe the acquisition cost is justified due to Block Mining’s substantial capacity and potential for expansion. The deal is expected to add 1 EH/s （Exahash per second） to Riot’s portfolio, significantly enhancing its mining capabilities and operational efficiency.
Long-Term Growth and Diversification
Riot Platforms’ strategic acquisition is part of a broader plan to diversify and expand its operations. The company aims to reduce geographic risk and increase its mining capacity, which is crucial for achieving long-term growth targets. Post-acquisition, Riot expects to spend $345 million in capital expenditures to fully develop Block Mining’s sites. However, Riot’s strong liquidity position, with $639 million in cash and significant Bitcoin holdings, supports this substantial investment.
Financial Outlook and Market Confidence
Following the acquisition, analysts have raised Riot’s 2024 revenue estimate to $344.2 million and adjusted EBITDA estimate to $321.7 million, reflecting confidence in the acquisition’s potential to drive growth and profitability. This optimistic outlook underscores the strategic value of the acquisition and its expected impact on Riot’s financial performance.
Conclusion
Riot Platforms’ acquisition of Block Mining is a strategic move to enhance its mining capacity and improve its hash rate. The substantial investment is justified by the potential for significant growth and operational efficiency. With a strong liquidity position and a clear strategic vision, Riot is well-positioned to achieve its long-term growth targets and maintain its leadership in the cryptocurrency mining industry.