IREN shares fall 24% on Nasdaq after ‘grossly overvalued’ criticism

Shares of Bitcoin mining company IREN, formerly known as Iris Energy, fell 24% on the Nasdaq after a report from short-selling firm Culper Research.

The paper, published on July 11, labeled the company “overvalued” and suggested its shares should be valued between 52% and 79% below their current market price.

HPC plans and underinvestment

After the report, according to data from Google Finance, IREN shares fell 24.5% to $10.36 before partially recovering to $11.20 in late trading.

Culper Research accused the company of making grandiose claims about its high-performance computing (HPC) plans while underinvesting in the necessary infrastructure.

“IREN talks a big game about its HPC plans, but in the end seems totally disinterested in doing what it takes to compete in the space,” the report states.

Culper noted that the company had spent less than $1 million per megawatt to build its current data center. Developing an HPC-ready data center is estimated to cost $10-20 million per megawatt. “By analogy, IREN claims he is ready to win the Monaco Grand Prix, but he just arrived on the track in a Toyota Prius,” the report states.

Other allegations pointed to discrepancies in IREN’s valuation of non-developable land and energy deals. According to Culper, IREN claimed those assets were worth $5 million to $12 million per megawatt despite spending only $4.7 million for its 1,400 MW West Texas interconnection depot.

Culper accused IREN of misquoting a Morgan Stanley research note that referred to the value of fully built infrastructure, not undeveloped assets. The memo estimated initial development costs at $12 million per megawatt, far exceeding IREN’s reported spending.

Culper Research says IREN is overvalued

Culper’s report also highlighted discrepancies in IREN’s valuation compared to its peers. While IREN is trading at $7.6 million per megawatt, recent industry M&A deals such as CoreWeave’s bid for Core Scientific and CleanSpark’s bid for GRIID were valued at lower figures ranging from 2.3 million to 2.8 million dollars per megawatt. If IREN’s valuation were to align with those figures, its shares could drop as much as 55%.

The report examined IREN’s cryptocurrency mining operations: “We assign a value of $0-$100 million to the company’s crypto mining operations, which again we believe is generous given that the business has historically effective burn,” Culper said.

Culper also noted that IREN fell short of its hashrate goals, achieving only 5.5 exahashes per second in April 2023, falling short of its goal of 10 exahashes per second. The report also discussed insider sales by IREN co-CEOs Daniel and Will Roberts from February 2024, which may have fueled investor concerns.

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