Iris Energy Faces Share Price Drop After Short-Selling Report

Iris Energy (IREN) experienced a significant drop of nearly 14% in its share price following the release of a short-selling report by Culper Research. The report highlighted concerns regarding the suitability of Iris Energy’s Childress, Texas site for artificial intelligence (AI) or high-performance computing (HPC) purposes.

Analysis by Bernstein:

Bernstein’s Take: According to analysts at Bernstein, Iris Energy has primarily focused its planned expansion at the Childress site on bitcoin (BTC) mining. The brokerage firm emphasized that the existing power and data center infrastructure at the location are well-suited for bitcoin mining operations.

Value Breakdown: Bernstein estimated that approximately 65% of Iris Energy’s value is attributed to bitcoin mining, with the remaining 35% stemming from AI/HPC endeavors. The firm disagreed with the notion that the mining activities hold no value.

Potential Upside: The potential for AI growth for Iris Energy lies predominantly at its 1.4 gigawatt West Texas site, which boasts a power interconnect. The opportunity for the company lies in the utilization of the land and power supply for future monetization.

Valuation Comparison: Bernstein compared Iris Energy’s valuation metrics to other bitcoin miners such as CleanSpark (CLSK) and Marathon Digital (MARA), noting that the company’s valuation aligns with those driven primarily by mining activities.

Recommendation: Bernstein recently initiated coverage of Iris Energy with an outperform rating and set a price target of $26. Despite the recent share price decline, the brokerage remains optimistic about the company’s prospects.

The shares closed at $11.20 on Thursday following the publication of the short-selling report, sparking further discussion within the investment community regarding Iris Energy’s future trajectory.