Starboard Is Said to Urge Riot to Speed Up Shift to Data Centers

Article content

(Bloomberg) — Activist investor Starboard Value is asking Riot Platforms Inc. to speed up its transition from Bitcoin miner to a data center company that could house hyperscaler tenants, according to a letter reviewed by Bloomberg News.

Article content

Starboard, which helped appoint directors to Riot’s board last year, could make its views known as soon as Wednesday, the firm said in the letter, which was signed by Peter Feld, Starboard’s managing member.

Article content

Article content

Riot is among the largest public Bitcoin mining companies in the US, operating some of the world’s largest mining sites in Texas. Shares of Riot have climbed 19% in the past year, giving the company a market value of about $6 billion. Starboard is Riot’s fourth-largest shareholder as of the end of last year.

Article content

Article content

Representatives for Riot and Starboard couldn’t immediately be reached for comment. 

Article content

Article content

Starboard views Riot’s two primary sites, Corsicana, outside of Dallas, and Rockdale, near Austin, as two of the most attractive US locations for high-performance computing and artificial intelligence data centers. Together, the sites comprise 1.7 gigawatts of fully available power, Starboard said. 

Article content

“In such a dynamic and rapidly evolving AI/High Performance Computing demand environment, Riot must urgently seize this extraordinary opportunity,” Feld said in the letter. 

Article content

Riot is on a growing list of Bitcoin miners that are pivoting to high-performance compute services to meet the growing demand for power, driven by the exponential rise in AI.

Article content

The pivot also comes as Bitcoin mining sees a plunge in revenue amid the crypto market crash that started in early October, and a surge in energy prices under recent extreme weather. 

Article content

Riot Chief Executive Officer Jason Les said last summer after second-quarter earnings that, given the attractive economics and higher valuation multiples associated with data center leasing, the company would convert much of its power portfolio to it. 

Article content

Article content

“The pace of transition from Bitcoin mining to data centers will be influenced by customer demand trends, the availability of financing and the general data center market,” Les said. “Our current efforts are laying a strong foundation for a pipeline of future transactions.”

Article content

Riot competitors such as Cipher and Terawulf that have ventured into AI projects have attracted big name investors like SoftBank Group Corp. and Google to develop data centers. Such partnerships are bringing in billions of dollars in projected revenue and enabling the firms to raise even more capital from debt financing, Bloomberg News has previously reported.

Article content

Starboard said that if Riot can monetize its power in line with recent transactions in the space, it could generate more than $1.6 billion in annual earnings before interest, taxes, depreciation and amortization.

Article content

The activist said that it expects Riot to execute on its strategy but added that it could also be “an exciting candidate for consolidation and we would expect there to be significant interest in the company and its premier power assets.”

Article content

—With assistance from David Pan.

Article content