Iris Energy, a Bitcoin mining company, saw its stock depreciate 24% on Thursday after getting roasted by activist short-seller Culper Research. 

Culper didn't mince words, comparing Iris's ambitious plans to showing up at the Monaco Grand Prix in a Toyota Prius. Typical short-seller behavior if I do say so myself.

Culper Research thinks Iris Energy is all bark and no bite. In their report, Culper claims Iris has spent less than $1 million per megawatt (MW) to build its current operations and promises investors the same cheap deals for future projects. Meanwhile, experts are practically falling off their chairs laughing, pointing out that a proper HPC-ready data center costs between $10 to $20 million per MW. Basically, Iris is trying to build a mansion with a kiddie-sized Lego set.

The short seller's analysis was like Tom Brady’s comedy roast—brutal and a little too honest. They called Iris Energy shares “wildly overvalued” and said the stock should be slashed by 52% to 79%. 

(Source: The View)

For context, Iris Energy’s market cap was a whopping $2.2 billion just last week. According to Culper, that number is pure fantasy, like thinking you can assemble IKEA furniture without swearing.

Culper’s report breaks down Iris Energy’s valuation into three main parts: the value of its existing facilities, undeveloped power, and crypto-mining operations. They generously value the company’s crypto mining operations between $0 to $100 million, emphasizing that just throwing out numbers doesn’t make it true. Historically, the business has been burning cash faster than a college tech bro at a NFT auction.

Culper’s take was absolutely brutal: “IREN has torched $716 million in cash since 2020, funding this circus by endlessly diluting investors – the share count has ballooned 12x in just four years.” Iris Energy is the financial equivalent of that friend who invites you to dinner and then mysteriously disappears when the check arrives.

Culper highlighted some recent blockbuster deals in the industry, like CleanSpark buying GRIID, Core Scientific teaming up with CoreWeave, and the never-ending Riot-Bitfarms drama. According to Culper, these deals make Iris Energy’s valuation look like a bad joke. 

On average, each of these deals implied a valuation of $2.5 million per MW. If Iris Energy were valued the same way, its stock would be worth $5.75 per share – a jaw-dropping 59% less than its current price. Reminds me of when I bought a Michael Kors watch on my NYC senior trip and then found out it was a cheap knockoff.

The report also highlighted insider selling from the company’s co-CEOs, brothers Daniel and Will Roberts all the way since February. It’s like the Spirit Airlines captain walking onto the flight with a parachute attached to his back as he says “welcome aboard”. Not exactly reassuring.

Culper’s report dropped right after Bernstein gave Iris Energy a thumbs up with an "outperform" rating, praising their mix of bitcoin mining and AI data center plans. But with Culper’s harsh critique now public, investors might want to think twice before jumping in.

Iris Energy isn’t the first Bitcoin miner to feel the heat from short-sellers this year. Kerrisdale Capital took a shot at MicroStrategy in March and swung at Riot Platforms in June. With Bitcoin continuing its “how low can you go” dance, the crypto mining space is starting to look less like a gold rush and more like a game of dodgeball, with short-sellers ready to peg anyone who steps onto the court.

Stock.News does not have positions in companies mentioned.