Analyst: Riot acquisition price of Block Mining is ‘justified,’ improves its hash rate

Analysts from H.C. 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 capacity by acquiring Kentucky-based Block Mining, Inc. for $92.5 million.

The acquisition consists of $18.5 million in cash and $74 million in Riot common stock, with an additional earn-out consideration of up to $32.5 million contingent on achieving specific milestones. 

“With a combined 60 MW of existing developed capacity, and a pipeline to rapidly scale to over 300 MW, this acquisition expands our operations and further enhances our path towards our growth target of 100 EH/s,” Riot Platforms CEO Jason Les said in a release.

Despite the high price tag, analysts at H.C. Wainwright believe the acquisition cost is justified due to BMI’s substantial capacity and expansion potential.

Riot is expanding its capacity and operations

Block Mining operates 60 MW across two data centers in Kentucky, adding 1 EH/s to Riot’s portfolio. The Commerce Drive data center in Paducah, KY, operates 35 MW, while the Blue Steel site in Calvert City, KY, utilizes 7 MW with an 18 MW vacancy.

Riot plans to expand these capacities significantly, targeting 110 MW by the end of 2024 and 305 MW by the end of 2025. This expansion will potentially increase Riot’s hash rate 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 beyond Texas, where all its mining operations were previously located.

Analysts see this as a prudent use of capital, enhancing Riot’s operational efficiency and reducing geographic risk.

Riot’s financial risks

Post-acquisition, Riot expects to spend $345 million in capital expenditures to fully develop BMI’s sites. Despite the substantial investment, Riot’s strong liquidity position, with $639 million in cash and significant Bitcoin holdings, supports this expansion. 

Analysts have raised Riot’s 2024 revenue estimate to $344.2 million and adjusted EBITDA estimate to $321.7 million, reflecting confidence in the acquisition’s potential to drive growth and profitability.