The hedge fund Kerrisdale Capital, known for publishing radical shorting reports, stated that they are shorting the stock of BitMine Immersion (BMNR), believing that this digital asset vault (DAT) focused on Ether has no scarcity and no reason to deserve a premium, pursuing a model that is heading towards extinction.
BitMine mimics MicroStrategy, but MSTR mNAV has declined to 1.5
The originator of the Bitcoin reserve strategy, MicroStrategy, whose operation model of Strategy ( has been widely replicated this year, with the digital asset financial company )DAT( selling shares at prices above the token value on their balance sheet, reinvesting the proceeds into more cryptocurrencies, and increasing the number of tokens per share in a self-reinforcing cycle. This cycle was effective in the early days, when scarcity and meme-like enthusiasm kept the Strategy's premium high even amid continuous dilution, but these conditions no longer exist. Due to policy reversals and unpopular financing scaring investors, the premium of the Strategy itself has fallen from a long-term 2–2.5 times mNAV to below 1.5 times.
BitMine is significantly increasing its share issuance at a rate of 170 million dollars per day.
BMNR has issued over $10 billion in new shares in just three months, averaging $170 million per day. The rapid pace of BMNR's stock issuance has turned early enthusiasm into fatigue, as investors have become accustomed to encountering more supply with each rebound. Although the company still reports nominal growth in total ETH tokens, the growth rate of ETH per share has slowed down as the net asset value premium narrows and the number of shares inflates.
Since BitMine does not regularly announce mNAV and shares like other DAT companies, Kerrisdale Capital can only rely on the most recent available documents from the U.S. Securities and Exchange Commission )SEC( and utilize weekly token and cash disclosures to reconstruct the per-share ETH value. According to their estimates, BitMine's current mNAV is still as high as 1.4 times )10/6(.
BitMine data is no longer transparent
Like most DATs, BMNR provides updates on its Ether (ETH) holdings almost weekly, but the data has become increasingly brief and less transparent. Prior to the press release on August 25, these updates occasionally included the NAV-per-share ) and the fully diluted share count. For example, the press release on August 25 indicated that the NAV per share was $39.84, with a total share count of 221.5 million shares. However, since then, BMNR has ceased to announce this data, only reporting the total number of ETH tokens, total USD holdings, and unrestricted cash.
Although other DATs provide dashboards that allow investors to track mNAV in real time, BMNR does not offer a similar function, making it even harder to track this trend as BMNR quietly removed the latest share count from its weekly press releases. Kerrisdale Capital believes this is a flashing red flag warning.
Premium issuance of new shares? A cleverly packaged form of dilutive financing
BitMine announced at the end of September that it would issue new shares at $70, a premium of over 14%, raising more than $300 million. However, Kerrisdale Capital believes that this transaction is actually a discounted gift when accounting for the value of the attached warrants. They pointed out that this deal is not a display of strength, but rather a cleverly packaged dilutive financing that sacrifices long-term credibility for short-term funds, undermining the premium narrative that BMNR is trying to sell.
(BitMine issued new shares at a premium of 70 USD, holding a total of 2.46 million Ether with total assets reaching 11.4 billion USD)
The key details are contained in language that retail investors may overlook: for every share of stock sold, the company grants investors two warrants, giving them the right to purchase an additional 10.4 million shares at $87.50. These warrants are by no means symbolic bonuses; they are central to the transaction.
Using the standard Black-Scholes pricing model ( current price = 61.29 USD, exercise price = 87.50 USD, term = 1.5 years, volatility = 100%, interest rate = 4% ) and considering a typical 40% discount for PIPE warrants, the economic valuation of each warrant is approximately 14 USD.
Once the cost of each warrant at $14 is taken into account, the title “$70, a 14% premium” no longer exists. The actual cost for these institutional investors is not $70, but rather about $42 per share, which is 31% lower than the market price at the time.
This is not a demonstration of the company's ability to enhance its flywheel effect, but rather a highly diluted capital raising disguised as a premium issuance. Management may argue that warrants with a higher exercise price are harmless as long as they are not exercised, because new shares will only join after a higher appreciation. However, in reality, warrants immediately siphon value from common stock shareholders, creating pressure that suppresses the stock price, and proving that BMNR cannot raise meaningful new funds purely through premiums. Investors purchasing this set of common stock and warrants may also engage in Delta hedging to capture the value of the warrants and reduce directional risk, which in turn exerts additional selling pressure on the stock. Within three days after BMNR's announcement, the stock price dropped by 15%, exceeding the 7% decline of ETH, and suppressed the brief rise of mNAV, which also confirmed Kerrisdale Capital's thoughts.
The competitive landscape of DAT is changing; recognition is not as good as directly purchasing ETH.
The competitive landscape of DAT is undergoing a fundamental transformation. Investors' choices have shifted from a few options to being overwhelmed by a multitude of crypto tools, which offer a series of nearly identical DATs. In the future, this will be amplified by a large number of ETFs, resulting in lower entry costs and higher liquidity.
As scarcity disappears, the net asset value premium of the entire industry collapses; many DATs are now trading at par or at a discount due to their reactive cycle stagnation and pattern collapse.
Kerrisdale Capital emphasizes that its argument is not against Ethereum (ETH) itself, but rather against the notion of investors paying a market premium for it. If investors believe in ETH, they should buy it directly, stake it with minimal friction, or hold one of the rapidly growing ETFs. The entire slogan of BMNR is to get investors to pay an inflated price for replicating a strategy that is no longer effective. This company has no strategy, no scarcity, and no reason to justify a premium!
BitMine bottomed out ETH, with a total holding of 3.03 million coins.
BitMine revealed its latest cryptocurrency holdings yesterday. As of October 12, the cryptocurrency assets held by BitMine include:
3,032,188 pieces of Ether
192 Bitcoins
$135 million worth of Eightco Holdings stock (ORBS)
104 million USD of undistributed cash
BitMine Chairman Tom Lee stated:
“The recent cryptocurrency liquidations have caused the price of ETH to drop, and BitMine seized this opportunity. Over the past few days, we have increased our holdings by 202,037 ETH, bringing our total ETH holdings to over 3 million, which accounts for 2.5% of the total supply of ETH, more than halfway to the 5% alchemy target.”
(Tom Lee: A pullback is a buying opportunity! BitMine bottomed out with 120,000 ETH over the weekend)
DAT will eliminate the weak and retain the strong, and high returns may become a thing of the past.
Although I do not agree with the argument that DAT will completely disappear, I hold the same view regarding the increasing opacity of BitMine's data. In the absence of knowledge about the number of new shares issued and the cost of purchasing ETH, investors buying BMNR have turned into a belief in Tom Lee. However, I have indeed noticed that many traditional investors are buying in.
In the face of continuous influx of competitors, the future of DAT will inevitably be survival of the fittest. Although MicroStrategy and BitMine have firmly established themselves as leaders in Bitcoin and Ethereum reserve strategies, the premiums will likely not be as high as in the past. Investors may only be able to buy on dips, and the high returns of the past may become a thing of the past.
BMNR has recently been consolidating in a large range. Although the stock price has fallen back to around $52 following the shorting report and the plunge of ETH, it still rose over 8% yesterday, remaining one of the stronger stocks in DAT.
This article states that BitMine holds 3.03 million ETH, and the data black box is not worth the premium. BMNR has been shorted and first appeared in Chain News ABMedia.
