Riot Platforms Q2 Losses Widen to $84.4M, Buys More Bitfarms Shares

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As an analyst with over two decades of experience in the tech and finance sectors, I find myself intrigued by Riot Platform’s Q2 performance. The widening losses and increased operational costs are a common challenge faced by Bitcoin miners post-halving. However, the aggressive approach towards acquiring Bitfarms indicates a strategic move that could potentially reap benefits in the long run.

Riot Platforms, a U.S.-based Bitcoin mining company listed on NASDAQ (RIOT), disclosed its Q2 financial results with a significant widening of net losses to approximately $84.4 million. This expansion in losses is attributed to the impact of the Bitcoin halving event in April, which decreased miner rewards while simultaneously boosting mining expenses for leading Bitcoin mining corporations. The reported loss per share was $0.32, double the predicted $0.16 per share.

In Q2 2024, Riot’s losses significantly increased, nearly tripling the $27.4 million loss reported in Q2 2023. This substantial increase in losses is primarily attributed to the sale of Bitcoin holdings to meet operational expenses and other administrative costs, which totaled an astounding $61.2 million – a threefold increase from the costs incurred during Q2 2023.

In the second quarter, Riot Platform announced a year-on-year decrease of 8.75% in their reported revenue, which amounted to $70 million. Despite a drop in engineering revenue, there was an uptick in Bitcoin mining revenue during the previous quarter.

To add to that, Riot Games also noted a decrease in Bitcoin mining production by about 52%, going from 1,775 BTC to 844 BTC between quarters. This drop can be attributed to the ‘halving’ event and higher network complexity, resulting in an increased average direct cost for mining Bitcoin. The second quarter of 2023 saw the cost per mined Bitcoin rise significantly from $5,734 to $25,327. In the recent quarter, Riot Games boosted its hashrate by double, reaching 22 EH/s, and anticipates that its self-mined hashrate will nearly double again, reaching 36 EH/s before the end of 2024.

For the recent quarter, the company announced earnings of approximately $13.9 million from power credit, with $4.4 million stemming from demand response initiatives. These efforts significantly reduced their typical energy expense.

Riot Turns Aggressive on Bitfarms Acquisition Strategy

According to a filing made with the US Securities and Exchange Commission (SEC) on July 31st, Riot Platforms has strengthened its strategy for acquiring Bitfarms by purchasing an additional 10 million shares of the company. Earlier this year, Riot attempted a hostile takeover of Bitfarms, but was unsuccessful.

In June 2024, Riot initially intended to acquire Bitfarms for $950 million, but eventually acknowledged they couldn’t proceed with the deal as planned, according to their official statement: “It appears that negotiating a potential merger with the current Bitfarms Board is not feasible.”

In the Q2 report, Riot CEO Jason Les highlighted additional achievements of the company, including the activation of its second major facility in Corsicana, Texas. This facility currently boasts two structures with a combined capacity of 200 megawatts. The company aims to have an additional pair of operational buildings by the end of 2024.

In the final month of July, Riot Platforms enlarged its growth strategy by purchasing Block Mining Inc., a company based in Kentucky. This acquisition boosted their power capacity by 60 megawatts across two sites, with the possibility of increasing it to more than 300 megawatts by the end of 2025.

Following the release of the Q2 report on Tuesday, the price of RIOT shares dropped by an additional 1.18%. In contrast to other Bitcoin mining companies such as CleanSpark, which have experienced growth in 2024, the RIOT stock has been subjected to significant selling pressure.

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2024-08-01 15:17