Riot Blockchain Responds to CNBC
CASTLE ROCK, Colo.,
Feb. 16, 2018 /CNW/ -- Riot
Blockchain, Inc. (Nasdaq: RIOT) (the "Company") provides the
following update to shareholders from Chairman and Chief Executive
Officer John O'Rourke about its
progress and accomplishments to date.
Dear Shareholders,
Thank you for your support in our vision to build a leading
blockchain technology company. I believe we are well positioned at
the forefront of this industry with many exciting opportunities on
the horizon.
Today, CNBC released a negative one-sided piece on companies
that seek to jump on the blockchain bandwagon by changing their
name and profiled 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.
Not to be deterred, I wish to provide an update of where Riot
Blockchain stands today and respond to some of their attacks. We
have made significant inroads in building a diversified portfolio
of investments and to begin securing digital assets.
Riot Blockchain initially entered the blockchain sector with an
investment in goNumerical ltd (dba "Coinsquare"). Coinsquare has
grown into the leading digital currency exchange in Canada and recently raised an institutional
round of financing at a CAD $430
million valuation, led by a global asset manager with over a
trillion dollars in assets. This valuation is over 15x higher than
the valuation at which Riot first invested. Riot currently owns
approximately 12.5% of Coinsquare, a stake now valued over CAD
$50 million.
Several other recent business highlights:
- Riot closed on a $37 million
financing at $22.50 per share in
restricted stock with several billion-dollar institutions as
investors. Canaccord Genuity acted as the financial advisor on the
financing.
- Riot now owns a total of 8,000 ASIC cryptocurrency mining
machines. This consists of 7,500 Antminer S9 Bitcoin miners and 500
L3+s, all manufactured by Bitmain.
- When deployed in full, Riot's bitcoin mining operation's
expected hashing power is over 110 Petahash of SHA 256 Bitcoin
mining computing power and 252 Gigahash of Scrypt for Litecoin
mining based just on current equipment that Riot owns. Additional
expansion opportunities based on power capacity are available.
- Riot has entered a Letter of Intent to acquire a CFTC licensed
registrant. Riot intends to pursue launching a digital currency
exchange and futures brokerage in the
United States.
- Strategic investment in Verady. Bo
Shen co-invested in Verady as well and joined the board of
Verady. Bo Shen is a well-regarded
investor in the space and a general partner of Fenbushi Capital
http://fenbushi.vc
- Successfully registered in and acquired 500 bitcoins in the
U.S. Marshals Service bitcoin auction.
- Acquired a majority interest in Tess, which is developing a
blockchain technology solution for the telecom industry. Tess has
since entered a definitive agreement for a merger with a Canadian
public company.
- Significantly enhanced the management, operational, and
advisory team with the appointment of several key personnel with
experience at market leaders such as IBM, Bitfury, Facebook,
INVESCO, Coinsquare, Ocular, Safenet, Hyperblock, Globalive, and
Dunbar Security Solutions.
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.
The company announced on January 20,
2017 the decision to streamline the workforce in an effort
to cut costs, while reviewing possible strategic alternatives for
the business.
We also discussed exploring strategic alternatives with the
ultimate goal of maximizing shareholder value and evaluated other
options. It is not uncommon for businesses to pivot and change
their business strategy. Amazon started off selling
books.
The company was able to successfully streamline its workforce
and significantly reduce its burn by July
2017. In the interim, the board and management continued
reviewing various different potential transactions that we thought
could be accretive. In August 2017,
we were presented with the opportunity to invest in Coinsquare.
I had been evaluating many different investment opportunities in
the blockchain sector. I have been personally invested in bitcoin
since 2012 and I have personally invested in several blockchain
companies since then. I am a believer that blockchain technology
will be one of the most disruptive technologies of my lifetime and
will do for the flow of transactions what the internet did for the
flow of information.
It is worth noting that CNBC recently highlighted an infamous
short seller complaining he could not borrow shares and adequately
short Riot, which seems to be an impetus to distort the real facts
about our company.
Other comments to address media concerns:
- We adjourned our shareholder's meeting which is not uncommon
when unable to garner a quorum. With the fast pace at which
everything has been moving operationally, we did not have requisite
time to obtain this quorum and we have other corporate action items
that may require shareholder approval as well. It did not make
sense to go through the time and expense of potentially having two
shareholder meetings within a matter of months. As a result, we
adjourned the meeting which will be reconvened in the second
quarter.
- At the end of 2017, I personally sold some stock that I held in
our company. I sold less than 10% of my overall position and did so
to cover tax obligations. I could have sold more stock in the same
timeframe if I so desired. I truly believe in what we are building
and the shareholder value it will create
- Barry Honig has been a
supportive shareholder of Riot Blockchain. Prior to my involvement
with Bioptix, Mr. Honig filed a lawsuit against the company and its
management as a shareholder because he believed the old management
and board was not properly deploying shareholders' cash. This led
to the eventual re-examination by the board and management of the
failing business, which ultimately led to the board's decision that
it was in shareholders' best interest to evaluate other
opportunities with its cash on hand.
- We have assembled a management team, board, and advisors with
exceptional industry credentials that have helped guide us and
continue to create opportunities with meaningful technology and
initiatives. Other companies may have tried to hop on the
"cryptocurrency bandwagon", perhaps partially as a result of our
success.
- After I was accosted without notice by certain reporters from
CNBC, I had no interest in further dialogue with those reporters.
We will continue to inform the markets of our activities through
appropriate means such as press releases and our regulatory
filings. The CNBC one-sided narrative has failed to tell the full
story and latched on to innuendo and "empty chair" reporting.
Riot Blockchain Transformation
Coinsquare stood out to the board and management due to its
exceptional management team and platform. We decided to make an
initial investment at a $28 million
valuation and form Riot Blockchain. We are proud of the value this
has since generated for all legacy shareholders of Bioptix, as this
investment alone is now worth close to double what the entire
market cap of Bioptix was prior to the transition.
Part of the further thesis around forming Riot Blockchain was to
provide investors a way to get exposure to this growing technology
with the transparency and disclosure obligations that come with
operating a Nasdaq listed and fully SEC reporting company. To my
knowledge, we were the first Nasdaq listed company to have
blockchain in its name. The management and board had no idea what
the market reaction would be to this shift in focus. We have
brought on seasoned advisors, board members, and management in
conjunction with this shift to focus on investing in and operating
blockchain technologies. Unfortunately, as with many new hot
sectors, it attracted some bad actors trying to capitalize on the
hype that appeared to quickly change their name and tout their new
focus on this sector. This all followed Riot's successful
transition.
One of our internal focuses has been on building our bitcoin
mining operation. We now own 7,500 Antminer S9 Bitcoin miners and
500 L3+s, all manufactured by Bitmain. We expect to have a sizable
portion of our operation up and running by the end of this quarter,
and to be fully operational with the current equipment on hand by
the end of Q2 2018. When deployed in full, the operation's expected
hashing power is over 110 Petahash of SHA 256 Bitcoin mining
computing power and 252 Gigahash of Scrypt for Litecoin mining. I
believe this will position us as one of the largest publicly listed
bitcoin mining operations.
We are also focused on pursuing the launch of our own digital
currency exchange. We have engaged a team of top legal counsel to
assist us in this endeavor. We announced that we have entered a
Letter of Intent to acquire a CFTC licensed registrant which would
also allow us to launch a futures brokerage. Neither the CFTC nor
the NFA regulate spot-market digital currency exchanges or
activity, although the CFTC's jurisdiction is implicated when there
is fraud or manipulation involving a virtual currency traded in
interstate commerce.
I believe there is a major market need for additional
competitors for digital currency exchange offerings in the United States. We are embracing regulatory
and compliance requirements in this regard with the hope of
establishing a fully transparent and secure platform to help handle
the growing demand of people wishing to transact in digital
currencies.
We take our SEC reporting obligations seriously and diligently
file all reports and filings. We have expended enormous effort to
inform investors of the risks of our foray into uncharted
territory. We have an open and expansive dialogue with the SEC
Division of Corporation Finance about our registration statements
and other filings with a goal to satisfy the collective sentiment
of the staff of the various divisions of the SEC that are
struggling to find common ground around how best to regulate our
industry. We support full disclosure and will continue to work with
the staff of the SEC whenever new regulations provide definition to
this emerging sector. As has been noted by the Chairman in recent
testimony, the regulators need to catch up with the business
developments and we hope to remain at the forefront as a fully
compliant reporting company.
In closing, we are well capitalized with a strong team, strong
assets, and growing operations. I originally came on as Chairman
and CEO in November 2017 due to the
tremendous opportunities that exist for blockchain technologies. I
have never felt better about Riot Blockchain's prospects of
capitalizing on these opportunities.
Warm regards,
John O'Rourke
Chairman and CEO
About Riot Blockchain
Riot Blockchain, Inc. is leveraging its expertise and a network
of professional advisors to build and support blockchain
technologies. It is establishing an Advisory Board with technical
experience intending to become a leading authority and supporter of
blockchain, while providing investment exposure to the rapidly
growing Bitcoin and blockchain ecosystems. For more information,
visit http://www.RiotBlockchain.com/.
Investor Notice
Investing in our securities involves a high degree of risk.
Before making an investment decision, you should carefully consider
the risks, uncertainties and forward-looking statements described
under "Risk Factors" in Item 1A of our most recent Form 10-Q for
the period ended September 30, 2017
filed with the Securities and Exchange Commission (the "SEC") on
November 13, 2017 and in Item 1A of
our most recent Annual Report on Form 10-K for the fiscal year
ended December 31, 2016 filed with
the SEC on March 31, 2017, as amended
as of April 27, 2017 and August 15, 2017. If any of these risks were to
occur, our business, financial condition or results of operations
would likely suffer. In that event, the value of our securities
could decline, and you could lose part or all of your investment.
The risks and uncertainties we describe are not the only ones
facing us. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business operations.
In addition, our past financial performance may not be a reliable
indicator of future performance, and historical trends should not
be used to anticipate results in the future. See "Safe Harbor"
below.
Safe Harbor
The information provided in this press release may include
forward-looking statements relating to future events or the future
financial performance of the Company. Because such statements are
subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by such forward-looking
statements. Words such as "anticipates," "plans," "expects,"
"intends," "will," "potential," "hope" and similar expressions are
intended to identify forward-looking statements. These
forward-looking statements are based upon current expectations of
the Company and involve assumptions that may never materialize or
may prove to be incorrect. Actual results and the timing of events
could differ materially from those anticipated in such
forward-looking statements as a result of various risks and
uncertainties. Detailed information regarding factors that may
cause actual results to differ materially from the results
expressed or implied by statements in this press release relating
to the Company may be found in the Company's periodic filings with
the Securities and Exchange Commission, including the factors
described in the sections entitled "Risk Factors", copies of which
may be obtained from the SEC's website at www.sec.gov. The parties
do not undertake any obligation to update forward-looking
statements contained in this press release.
Media Contacts
Karen
Chase or Travis Kruse
Russo Partners, LLC
(646) 942-5627
(212) 845-4272
karen.chase@russopartnersllc.com
travis.kruse@russopartnersllc.com
Investor Contact
IR@RiotBlockchain.com
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SOURCE Riot Blockchain, Inc.