New York-based investment management firm Kerrisdale Capital has shorted Bitmine Technologies (BMNR), the leading Ethereum (ETH) treasury firm run by famed permabull Tom Lee.
Its report says that BMNR is currently chasing a model that is "on its way to extinction."
Kerrisdale Capital argues that the red-hot company does not actually bring anything new to the table since it simply copies the playbook pioneered by Michael Saylor's Strategy and adopted by plenty of other imitators.
Collapsing premiums
The investment management firm claims that the BMNR short should not be interpreted as a bet against Ethereum (ETH). It is simply convinced that investors will not be willing to pay a premium for BMNR shares.
Strategy, which used to enjoy a 2.5x premium, has faced difficulties due to dilution concerns and other issues. The premium has now slipped to just 1.5x, and the same trend can be observed across the broader sector.
"BMNR’s pitch rests on the idea that it can deliver more than the token alone, yet the strategy is generic, the competition is mushrooming, disclosures have grown opaque, ETH-per-share has slowed, and capital raises promoted as 'premium' are in reality dilutive," the report said.
This skepticism is also shared by Justin Spittler, chief trader at RiskHedge. In a recent social media post, he predicts that BMNR will end up underperforming ETH once people "get bored" and move on.
Leading ETH treasury holder
According to data provided by CoinGecko, BitMine is the largest ETH holder with $12.8 billion worth of the largest altcoin.
It is worth noting that controversial billionaire Peter Thiel, who was recently criticized by Ethereum co-founder Vitalik Buterin, holds a 9.1% stake in the company.
The company's shares are down a whopping 63% from their record high.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team