Bitcoin mining giant Riot Platforms might be sitting on a goldmine—one it hasn’t fully tapped into yet. Starboard, one of the most aggressive activist investors in the US stock market, has taken a massive position in the company, and according to them, Riot could transform itself by moving focus to hyperscaler demand.

Riot owns and operates huge Bitcoin mining facilities across central Texas and Kentucky and runs a robust electrical engineering division out of Denver.

While the company holds 16,728 Bitcoins and boasts a mining infrastructure of over 1 gigawatt (GW) capacity, it has been underperforming in the stock market, apparently creating a compelling case for Starboard’s intervention.

Riot’s performance in numbers—and why Starboard cares

At $11.55 per share and a market valuation of $3.97 billion, Riot Platforms is no small fish. But this year has been rough. Bitcoin has surged by 130%, yet Riot’s stock dropped 24%, far behind competitors who’ve posted triple-digit gains.

This underperformance points to serious issues in operations and leadership. Starboard isn’t known for sitting quietly when there’s potential to make a company profitable.

With 155 activist campaigns under its belt and an average return of 23.27% on those campaigns, Starboard’s presence alone tells us that Riot might be forced into big changes.

The numbers don’t lie. Riot spent $225 million on selling, general, and administrative (SG&A) costs this year—more than triple the $67 million it spent in 2022.

Much of this expense comes from executives rewarding themselves with stock-based compensation, gobbling up 11.5%, 9.5%, and a ridiculous 32.12% of total revenue over the last three years. Despite this, Riot’s management has produced nothing but losses, with this year’s operating loss surging to $304 million, its worst ever.

The company’s corporate governance is equally shaky. A staggered five-member board, instances of nepotism, and questionable leadership decisions have left Riot with the highest power cost and SG&A expense per Bitcoin mined.

The result was a dirt-cheap valuation compared to industry peers based on metrics like enterprise value to petahash per second (EV/PH/s).

Why Starboard thinks hyperscalers are a trillion-dollar opportunity

Starboard is an investor, so it’s solely here to make money. Its plan for Riot is to get into the hyperscaler market. Hyperscalers are the giants of cloud computing—think Amazon Web Services, Microsoft Azure, and Google Cloud—who run massive data centers to support AI and high-performance computing (HPC).

These companies are desperate for infrastructure, and Bitcoin mining facilities like Riot’s are a perfect match. Starboard pointed out that Riot already has the goods. Its Rockdale, Texas site is the largest Bitcoin mining facility in North America, with 700 MW of capacity.

The Corsicana, Texas facility, set to hit 1 GW when completed, has 400 MW of capacity ready now. These facilities share key attributes with hyperscaler needs: high-performance computing infrastructure, renewable energy access, and scalability.

Competitors have already seized this opportunity. Core Scientific, another Bitcoin miner, inked a deal with CoreWeave, an AI data center startup backed by Nvidia, to lease 500 MW of capacity. That deal is worth $8.7 billion over 12 years and delivers 75-80% profit margins—far better than the margins in Bitcoin mining.

Core Scientific’s stock soared 40% the day after announcing the deal and is up 220% this year. Riot could rake in similar profits. Leasing the unused 600 MW at Corsicana could bring in $600 million annually, nearly doubling its current $313 million revenue.

If Riot converted its entire 1.1 GW of capacity at Rockdale and Corsicana to hyperscaler use, those numbers could triple. Better yet, hyperscalers apparently often cover the cost of building or retrofitting these facilities.

Companies like Hive Digital and Hut 8 are also making the change, with Bitcoin miners that have embraced hyperscalers posting an average year-to-date stock return of 105.8%. Riot, along with other laggards like Marathon Holdings and CleanSpark, sits at -3.4%. The math is simple: adapt or fall further behind.

But Riot isn’t entirely blind to its options. The company recently spent $510 million buying Bitcoin on the open market, financed through convertible senior notes. This hints at a desire to hold more Bitcoin without expanding mining capacity.

But Starboard’s plan offers a better route: use hyperscaler revenue to fund Bitcoin purchases, creating a cycle of cash flow and asset accumulation. A MicroStrategy of some sort.

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Ethereum educator and advocate Anthony Sassano has made a case for someone to lead a Bitcoin-like charge on behalf of the Ethereum community, similar to Microstrategy’s Michael Saylor. He took to his handle on X (formerly Twitter) to ask if Ethereum would enjoy the same success as Bitcoin should a Saylor-like personality promote the token.

The scenario Anthony Sassano teased is based on Saylor’s role in the push for Bitcoin adoption. Michael Saylor and his firm, Microstrategy have become the face of Bitcoin adoption, buying millions upon millions worth of the digital asset strategically.

The company’s initiative has installed Bitcoin as a source of value and as a better hedge against inflation, reducing its appearance as a speculative asset. While Microstrategy and Saylor have been more steadfast than most, other entities have also been integral in promoting the asset.

Ethereum advocate makes his case 

The ETH advocate’s question caused quite a stir on X. Several users dropped their takes, discussing at length the reason why the ETH space needs its own high-profile champion. A user noted that it would be incredible, noting that the influence of the person will really provide great help to Ethereum.

I still think there is an absolutely massive opportunity for someone to become Ethereum's Saylor-like figure

Just relentlessly buying ETH no matter the price and then shilling ETH (and Ethereum!) endlessly to mainstream audiences

I wish I had the money to do this myself 😅

— sassal.eth/acc 🦇🔊 (@sassal0x) December 22, 2024

Another user claimed there could be a concentrated decentralized effort, noting that the action could see input from influencers, whales, and other users in the space. One mentioned that a centralized figure could help boost ETH’s price, using structured mechanics. The user suggested a model that will include bonding, token boosts, and borrowing mechanisms, noting that it could help accelerate the price of the token. One user talked about yield integration, noting that it could make the strategy very effective.

Meanwhile, some users brought up examples of personalities that they felt could fill the gap. A user suggested Bit Digital CEO Samir Tabar, highlighting that his company mines Bitcoin to accumulate Ethereum, a move that has helped to promote ETH as a proxy.

Others also proposed other candidates, with a user highlighting the influence that United States President-elect Donald Trump could have on the price of Ethereum. He mentioned that his pro-crypto stance could be pivotal in shaping the future of the asset.

Challenges and the wider implications for Ethereum

The initiative, however, didn’t go down well with others, with most of them highlighting the dangers of centralized influence. A user noted that Saylor’s present and growing influence might be detrimental to the asset, noting that he holds about 2% of the total Bitcoin supply. The user noted that the development could deter others from adopting the asset, noting that a central person for Ethereum could face the same criticism.

Others also talked about how hard it is to create a company that will sustain the same hunger for Ethereum as the one Microstrategy has for Bitcoin. A user said Ethereum’s 75 million token during its pre-sale creates a unique dynamic that would discourage an entity from taking up a central role. One user also said there could be conflict of interest issues, noting that large holders or validators may not want to become a centralized figure to protect their positions within the network.

In addition, other users talked about Ethereum’s ecosystem and its unique characteristics. A user talked about the state of the network without a ‘champion’ like Saylor, suggesting that someone like Bankless could fill the role. Meanwhile, another user said the decentralized nature of the network makes it hard for it to rely on a central figure like Saylor for advocacy. The conversation also trickled into the relationship between Bitcoin and Ethereum, with a user highlighting Bitcoin’s 21 million cap makes it suitable for high-scale holding.

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