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

Analysts at 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 increased its growth and operational capacity with the acquisition of 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 the achievement of certain milestones.

“With 60 MW of existing developed capacity and a pipeline with the potential to rapidly expand to over 300 MW, this acquisition expands our operations and further strengthens our path to achieving our 100 EH/s growth target,” Riot Platforms CEO Jason Les said in a press release.

Despite the high price tag, HC Wainwright analysts believe the acquisition cost is justified due to BMI’s significant capacity and expansion potential.

Riot expands capacity and operations

Block Mining operates 60 MW across two data centers in Kentucky, adding 1 EH/s to Riot’s portfolio. Its Commerce Drive data center in Paducah, KY operates 35 MW, and its Blue Steel site in Calvert City, KY uses 7 MW with an 18 MW headroom.

Riot plans to expand these capacities significantly, aiming to reach 110 MW by the end of 2024 and 305 MW by the end of 2025. This expansion has the potential to 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 and diversifies Riot’s geographic footprint beyond Texas, where all of its mining operations were previously located.

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

Riot’s financial risks

Riot expects to spend $345 million in capital expenditures to fully develop BMI’s sites following the acquisition. 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 forecast to $344.2 million and adjusted EBITDA forecast to $321.7 million, reflecting confidence in the acquisition’s potential to boost growth and profitability.