Analysts from HC Wainwright claim that Riot’s acquisition of Block Mining is a great move for the company and its hash rate.
Riot Platforms, Inc. has significantly enhanced its growth and operational capabilities with the acquisition of Kentucky-based Block Mining, Inc. for $92.5 million.
The acquisition includes $18.5 million in cash and $74 million in Riot common stock, with an additional consideration of up to $32.5 million contingent upon achievement of certain milestones.
“With 60MW of existing developed capacity and a pipeline to rapidly expand to over 300MW, this acquisition expands our operations and further advances our trajectory toward our growth goal of 100 EH/s,” Riot Platforms CEO Jason Lis said in a statement.
Despite the high price, analysts at HC Wainwright believe the acquisition cost is justified due to BMI’s significant capacity and expansion potential.
Riot is expanding its capabilities and operations.
Block Mining operates 60MW across two data centers in Kentucky, adding 1 EH/s to Riot’s portfolio. The Commerce Drive data center in Paducah, Kentucky operates 35MW, while the Blue Steel site in Calvert City, Kentucky uses 7MW with 18MW available.
Riot plans to significantly expand this capacity, targeting 110 MW by the end of 2024 and 305 MW by the end of 2025. This expansion will likely increase Riot’s hashrate to 36.3 EH/s by the end of 2024 and 56.6 EH/s by the end of 2025.
Riot’s Long-Term Growth and Diversification
This acquisition aligns with Riot’s long-term goal of reaching 100 EH/s. Additionally, it diversifies Riot’s geographic footprint outside of Texas, where all of its mining operations were previously located.
Analysts see this as a wise use of capital, enhancing Riot’s operational efficiency and reducing geographic risk.
Riot’s Financial Risks
Following the acquisition, Riot expects to spend $345 million in capital expenditures to fully develop BMI sites. Despite the significant investment, Riot’s strong liquidity position, with $639 million in cash and significant Bitcoin holdings, supports this expansion.
Analysts raised Riot’s 2024 revenue estimates to $344.2 million and adjusted EBITDA estimates to $321.7 million, reflecting confidence in the acquisition’s potential to drive growth and profitability.