Kerrisdale Capital: Short BitMine Stock, DAT Strategy Lacks Ideas

Kerrisdale Capital, an investment firm, chose to short shares of BitMine Immersion (BMNR), an Ethereum digital treasury company. In its report, Kerrisdale Capital claims that BitMine is chasing a model that is about to die out. Its strategy is directly copied from Strategy (MSTR) and has been emulated by dozens of DAT imitators: sell shares at a price higher than the value of the tokens on the balance sheet, then recycle the proceeds to buy more cryptocurrencies and continuously increase the value of each token, forming a self-reinforcing cycle.
This cycle worked in the early days, when scarcity and meme-like enthusiasm kept Strategy's premium high, and these conditions have disappeared despite its dilution. After policy reversals and unwelcome fundraising spooked investors, Strategy's own premium has slipped from long-term 2-2.5 times mNAV to less than 1.5 times. In this environment, BMNR has pumped more than $10 billion (and still growing) of new shares into the market in just three months, roughly $170 million a day, in an attempt to restart a flywheel that has stopped spinning.
The speed at which BMNR's shares have been issued has turned early enthusiasm into weakness, with investors accustomed to believing that with each rally there will be more supply to satisfy. While the company is still reporting overall growth in the total amount of ETH tokens, the rate of appreciation per ETH has slowed as the NAV premium has narrowed and the number of shares has surged - a trend that has become harder to track after BMNR quietly pulled the latest number of shares from its weekly press release.