Riot Blockchain stock falls 33% after TV report
Questions raised about future of Castle Rock-based firm; official calls story “one-sided”
A CNBC news investigation into Castle Rock-based Riot Blockchain on Friday sent the company’s shares down nearly 35 percent after the story raised additional questions about the future of the company that changed its name to jump on a popular technology trend.
Riot’s stock had more than quintupled in December to a high of $46.20 after dumping its Bioptix name a few months earlier. But growing concern that the company had moved into a new business it knew nothing about in order to benefit certain shareholders followed Riot, as Wall Street skeptics and others warned of red flags. The Denver Post reported on those issues Feb. 11.
The CNBC report highlighted U.S. Securities & Exchange Commission concerns of companies adding “blockchain” to their names to hype their stock. TV crews also visited the Boca Raton Resort and Club in Florida where Riot canceled its shareholder meeting twice. Hotel officials said they never had a reservation for Riot.
CNBC also pointed to one of Riot’s former top shareholders, Barry Honig. He once owned 11 percent of the company before it renamed itself Riot. In a U.S. Securities & Exchange filing update this week, Honig’s ownership had dwindled to 1.3 percent of the company. Some of the decline is based on Riot’s more than doubling of its common stock in the past year. But Honig’s shares are now at to 151,210 shares, compared with 504,000.
Honig was the most vocal investor in 2016 when he led a shareholder revolt to force the company to end its pursuit of failed biotech products. Three board members, including former Colorado Lt. Gov. Gail Schoettler, resigned. Honig nominated John
O’Rourke to the board in January 2017, and O’Rourke eventually became Riot’s new CEO. O’Rourke said he had dabbled in bitcoin in 2013 and helped develop the company’s new business model.
On Friday, Riot released a lengthy letter from O’Rourke to shareholders regarding the CNBC report: “Today, CNBC released a negative one-sided piece on companies that seek to jump on the blockchain bandwagon by changing their name to profit from an increase in their stock price and pro- filed our company. Had the journalist used even a modest amount of professional diligence, CNBC would have also reported on the numerous achievements we have made in becoming an early entrant in the support of blockchain and cryptocurrency technologies. To my knowledge, we were also the first Nasdaq listed company to have blockchain in its name and had no idea what the market reaction would be when the transition was made.”
In it, O’Rourke said Riot has made several investments in blockchain companies, including a minority stake in Coinsquare, a digital currency exchange in Canada; 8,000 cryptocurrency mining machines; and 500 bitcoins won during a U.S. Marshals Service bitcoin auction.
“When I joined the board of Bioptix in January 2017, the Company had been reeling from a failed FDA approval and an acquisition of a new venture bleeding cash. I feel obligated to state unequivocally that pivoting away from these legacy ventures to Riot Blockchain was the right course,” O’Rourke said.
Riot’s shares closed at $11.46 on Friday, down 33 percent or $5.74.