Bitcoin miner Iris Energy's stock plummets after short seller calls company a 'Prius at the Grand Prix'

Iris Energy’s stock plunged nearly 20% in midday trading Thursday after activist short seller Culper Research published a short report on the bitcoin miner’s stock. The short-seller analogized the company as looking “to win the Monaco Grand Prix, but just arrived to the track in a Toyota Prius.”

“​​IREN talks a big game of its HPC plans, but ultimately seems entirely disinterested in actually doing what it takes to compete in the space,” Culper analysts wrote in the report. “The Company has spent less than $1 million per MW to build out its existing footprint, and tells investors it will complete the Childress build for a similar sub- $1 million per MW figure. Meanwhile, leading operators, analysts, and experts all confirm that the true cost to develop an HPC-ready data center is ~$10 to $20 million per MW.”

Culper views Iris Energy shares as “wildly overvalued,” worth anywhere from 52% to 79% less than current prices on this sum-of-the-parts basis. 

According to data from YCharts, the company's market cap was $2.2 billion just a week ago. Culper estimates that number should be a fraction of that.  

The short seller said Iris Energy's valuation could be divided into three buckets: the value of its existing facilities, its undeveloped power, and its crypto-mining operations.

“We ascribe $0 to $100 million in value to the Company’s crypto mining operations,” Culper analysts wrote, “which again we feel is generous given that the business has historically burned cash, while the April 2024 halving has further decimated economics and miners continue to grow their hash rates aggressively over the coming years.”

Iris Energy could not immediately be reached for comment.

Culper also views recent deals in the space — specifically, CleanSpark buying GRIID, Core Scientic's contract with Coreweave, and the ongoing Riot-Bitfarms saga — as exposing Iris Enrgy’s “ridiculous valuation.”

“As shown below, each deal implied a valuation of $2.5 million per MW, on average. At the same multiple, IREN would trade to $5.75 per share, or 59% less than today’s price. Investors wishing for a buyout offer like those received by Core or Griid should be careful what they wish for.”

Culper also pointed to insider selling of shares from the company’s co-CEOs, brothers Daniel and Will Roberts, since February.

“Since 2020, IREN has burned $716 million in cash, and funded this charade by diluting investors to seemingly no end – share count has exploded 12x in the past 4 years,” Culper wrote. “We believe IREN is a painfully transparent stock promotion that will unravel as investors realize the Company’s HPC claims are nonsense and IREN remains a cash guzzling machine.”

After hitting a session low of $10.36, IREN stock was trading down about 12.8% to $11.24 per share at publication time. Shares are up 65% year-to-date. 

Culper’s report comes just two days after analysts at research and brokerage firm Bernstein initiated coverage on IREN with an outperform rating, citing the company’s hybrid bitcoin mining and AI data center strategies.

Culper isn’t the first short seller to go after publicly traded Bitcoin miners this year. Kerrisdale Capital released a short report critical of MicroStrategy back in March and hit Riot Platforms in June.