It’s easy for investors to lose focus and chase the stocks that are delivering the best returns on a given day in the markets. This is especially true when it comes to small-cap stock investing. At Beat Billions, we dig deep into the fundamentals of small-cap stocks to unearth valuable insights about publicly-listed companies to help investors make better investment decisions. Today, we will uncover some hidden truths about Riot Blockchain, Inc. (RIOT) as there’s a hype about the stock after shares gained a staggering 21% yesterday (May 7) and a further 9% in after-hours trading.
RIOT has not always been about Bitcoin
This might surprise an investor considering RIOT’s name suggests that it’s well and truly a business focused on the blockchain technology and Bitcoin mining. The company, until very recently, operated as a biotech company! Yes, you heard that right!
Until October of 2017, RIOT Blockchain operated under the name of Bioptix. Here’s another surprise. Bioptix was not the first name it used either. Prior to this, the company operated as Venaxis. No, we are not done yet. Even before that, RIOT operated under the name of AspenBio since its establishment in 2000.
There have been 4 name changes within 20 years, and there’s only one similarity: the company, regardless of its name changes, has never turned in a profit in all these 20 years.
What happened in 2017?
The latter half of 2017 has gone down in the history books as a record-breaking period for Bitcoin. RIOT Blockchain’s name-change came in October, right when the terms “blockchain” and “Bitcoin” were making headlines in financial media. RIOT stock price, as a result, ballooned to never-before-seen highs, not because of an improvement in its financial performance, but because of the hype about cryptocurrencies.
As illustrated in the above chart, RIOT stock price skyrocketed in the last few months of 2017, in line with the historic gains of Bitcoin. But, the party did not last long. When Bitcoin price retrieved and shed most of its gain in the following few months, RIOT stock fell even harder.
What RIOT did not do when Bitcoin was $20,000, it won’t do when Bitcoin is $10,000
True, RIOT delivered stellar returns to investors for a limited time period when Bitcoin was firing from all cylinders in 2017. Today, investors are expecting a similar kind of performance from RIOT shares as cryptocurrencies are once again making moves in the market. Before jumping on board, however, investors need to remind themselves that RIOT did not deliver its promises the last time around. The company failed to improve its financial performance during and after the Bitcoin bubble.
On May 6, the company reported mining 108 Bitcoins in April. This improved the sentiment of investors toward RIOT stock, but this development is too little information to point to rosy days for the company.
Bitcoin is one of the most volatile asset classes and this volatility creates a high degree of uncertainty regarding the prospects for RIOT Blockchain.
Beat Billions’ takeaway: there are better ways to invest in cryptocurrencies than RIOT Blockchain stock
Changing the name of a company 4 times within 2 decades is something that should flash warning signs to investors. Many investors who are unaware of the company’s past assume that RIOT has always been a company focused on cryptocurrencies. In reality, the company has changed its name multiple times just to create a hype about its business prospects and to improve the sentiment toward its shares, in our opinion. Therefore, we believe the best course of action for an investor is to avoid RIOT shares altogether.
A better way to invest in Bitcoin is to directly buy the cryptocurrency through an exchange or to invest in a fund that specializes in Bitcoin and other cryptocurrency assets.
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Come back tomorrow to read our research on Smith Micro Software, Inc. (SMSI).