Key Takeaways
- • Leopold Aschenbrenner's Situational Awareness added 49% to its Riot Platforms stake in Q2, lifting holdings to 17.10 million shares worth $468 million at June 30 quarter-end prices, or 2.3% of its $20.17 billion US equity book.
- • Jeff Smith's Starboard Value cut its Riot stake 35% to 10.11 million shares worth $277 million, yet Riot still represented 6.1% of Starboard's $4.52 billion US stock portfolio, its eighth-largest position.
- • Riot trades at 6.8x forward sales, down from 16x in late June but still above its five-year average of 6.2x, with analysts expecting losses through 2028 and negative free cash flow of $1.5 billion in 2027 and $1.7 billion in 2028.
- • Riot must replace a $573 million Morgan Stanley bridge loan due Dec. 31, a financing test that will determine whether its Texas data center leases, with contracted revenue of about $9.8 billion, can be built as planned.
Summary
Riot Platforms (RIOT) has lost more than half its value since June 30, and two prominent funds took opposite positions in the stock heading into the decline. According to each fund's 13F filing for the quarter ended June 30, filed Aug. 14, Leopold Aschenbrenner's Situational Awareness increased its Riot holding while Jeff Smith's Starboard Value reduced its position by 35%. The latest 13F filings for the quarter ended Sept. 30 are due by Nov. 16.
Situational Awareness held 17.10 million Riot shares on June 30, a 49% increase from three months earlier. The position was worth $468 million at quarter-end prices, representing 2.3% of the fund's $20.17 billion in US stocks and making Riot its 10th-largest holding. Starboard held 10.11 million shares worth $277 million, along with put options carrying a notional value of $2 million. Even after the reduction, Riot accounted for 6.1% of Starboard's $4.52 billion US stock book, a far larger share than Aschenbrenner's allocation. The filings do not disclose purchase prices or whether either fund still holds the shares.
The bull case rests on Riot's Texas power and data center business. Management puts contracted data center revenue at about $9.8 billion from leases with AMD and an AI lab that Bloomberg reported is Anthropic, though neither company has confirmed this. Analysts expect revenue to rise from $647 million in 2025 to $1.24 billion in 2028, with most of the increase in the final year. Analysts' 2028 revenue estimate was 22% higher on Oct. 23 than on June 30. However, analysts expect losses each year through 2028, and interest expense of $390 million in 2028 compares with EBITDA of $409 million.
Valuation is elevated relative to Riot's history. With no forward earnings, the stock is valued on forward sales at 6.8x, down from 16x in late June but above its five-year average of 6.2x. The 22 analysts covering the stock have an average target of $29.02, though targets have been cut recently: Cantor Fitzgerald lowered its target to $24 from $30 on Oct. 16, citing rising financing costs, and ATB Cormark Capital Markets cut to $30 from $36 on Oct. 22. The lowest target is $13.
Riot's near-term financing remains the key uncertainty. Its fallback is an unused $500 million at-the-market share program if project lenders balk. Riot reports Q3 results in early November, and a signed lease for its Corsicana campus, currently only a letter of intent, would strengthen the bull case. Based on TIKR's analysis, Starboard's reduction appears the more prudent stance for now, according to the publisher's view.
Situational Awareness held 17.10 million Riot shares on June 30, a 49% increase from three months earlier. The position was worth $468 million at quarter-end prices, representing 2.3% of the fund's $20.17 billion in US stocks and making Riot its 10th-largest holding. Starboard held 10.11 million shares worth $277 million, along with put options carrying a notional value of $2 million. Even after the reduction, Riot accounted for 6.1% of Starboard's $4.52 billion US stock book, a far larger share than Aschenbrenner's allocation. The filings do not disclose purchase prices or whether either fund still holds the shares.
The bull case rests on Riot's Texas power and data center business. Management puts contracted data center revenue at about $9.8 billion from leases with AMD and an AI lab that Bloomberg reported is Anthropic, though neither company has confirmed this. Analysts expect revenue to rise from $647 million in 2025 to $1.24 billion in 2028, with most of the increase in the final year. Analysts' 2028 revenue estimate was 22% higher on Oct. 23 than on June 30. However, analysts expect losses each year through 2028, and interest expense of $390 million in 2028 compares with EBITDA of $409 million.
Valuation is elevated relative to Riot's history. With no forward earnings, the stock is valued on forward sales at 6.8x, down from 16x in late June but above its five-year average of 6.2x. The 22 analysts covering the stock have an average target of $29.02, though targets have been cut recently: Cantor Fitzgerald lowered its target to $24 from $30 on Oct. 16, citing rising financing costs, and ATB Cormark Capital Markets cut to $30 from $36 on Oct. 22. The lowest target is $13.
Riot's near-term financing remains the key uncertainty. Its fallback is an unused $500 million at-the-market share program if project lenders balk. Riot reports Q3 results in early November, and a signed lease for its Corsicana campus, currently only a letter of intent, would strengthen the bull case. Based on TIKR's analysis, Starboard's reduction appears the more prudent stance for now, according to the publisher's view.
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