Short selling data can help investors avoid large losses. Short sellers tend to do their research. If they’re shorting a stock, there’s usually a good reason they are doing so.
In this report, we are going to look at the short selling data on Riot Blockchain Inc (RIOT:US). Riot is an American Bitcoin miner. The company, which was previously a failed medical device maker called Bioptix, has mining operations in both Texas and New York. It is listed on the NASDAQ Capital Market and currently has a market capitalization of $573 million.
Riot Blockchain Inc: Short Selling Data
Looking at the short selling data on Riot Blockchain, we see several things that concern us. The first is that short interest is extremely high. At present, 51.47 million RIOT shares are on loan. That represents roughly 47.1% of the free float. This tells us that sentiment towards the stock on the institutional side is very bearish.
Another issue of concern is that the number of shares on loan is rising. At the start of April, 40.4 million shares were on loan. Since then, the figure has risen by 29%. That is a significant increase in the space of three months and indicates that short sellers are ramping up their downside bets here. And what’s really worrying, is that the number of shares on loan has risen as the share price has fallen.
Why Short Sellers Are Targeting Riot Blockchain
As for why the short sellers are targeting Riot Blockchain, it’s most likely down to the fall in crypto prices lately. This year, the price of Bitcoin has fallen around 60%, and as we write this, it’s currently under $20,000. This is bad news for Riot, whose business model depends on the success of Bitcoin. This is illustrated by the fact that Q1 2022 revenue fell to $79.8 million, from $90.9 million in Q4 2022. It’s worth noting that capital markets conditions have deteriorated dramatically recently and in order to generate cash, Riot has been forced to sell Bitcoins at lower prices.
It could also be down to the fact that mining has slowed recently. In May, the company mined a total of 466 Bitcoins. That represented an 8% decrease on the number of Bitcoins mined in April.
Whatever it is the short sellers are looking at here, we think caution is warranted towards the stock. The high level of short interest is a bearish signal, in our view.