Meet Riot Blockchain, Wall Street's Latest Trendy Stock

Riot Blockchain (NASDAQ:RIOT) briefly gained more than 15% in morning trading Tuesday, extending the stock’s strong run and lifting it to a new 52-week high. Shares quickly fell from that peak, but the former biotech equipment company, which now focuses on buying cryptocurrency and blockchain businesses, have still soared nearly 50% in the past five days.

If you are feeling left out of the fun—or if you are thinking ‘What the heck is a Riot Blockchain?’—don’t worry, you are not alone. The company has exploded into popularity on investing social media forums only recently, and for many, Riot’s business model is still relatively unclear.

Let’s start with what we do know. On Wednesday, Oct. 4, a small firm focused on manufacturing biotech diagnostic machinery, Bioptix Inc., changed its name to “Riot Blockchain Inc.” in the hopes of more accurately representing its new focus.

Based in Castle Rock, Colorado, Bioptix found itself in dire straits recently. The company was once known as Venaxis Inc., but it changed its name after buying out BiOptix Diagnostics Inc. in 2016. According to company management, that acquisition turned out to be a mistake.

“When I got on the board, they had made an acquisition that we decided as a board did not make sense, so we closed that down and then decided to change our focus,” Riot Blockchain CEO Michael Beeghley told Bloomberg last month. “We looked at the sector and said, ‘How can we participate in this, and how can our shareholders participate in this very exciting industry that’s like the beginning of the internet?’”

But what exactly is this exciting new industry that Beeghley speaks of? We know that Riot’s new focus is to invest in companies that utilize blockchain technology or engage in the cryptocurrency business, but what does that even mean?

Let’s define some key terms here. First up, the word “cryptocurrency” refers to any form of digital currency that uses cryptography to secure transactions, verify transfers, and control the creation of new units.

A blockchain is basically a continuously-growing record book that uses cryptography to link and secure individual records, which are called “blocks.” By now, you have likely heard of bitcoin, the world’s most popular cryptocurrency. Bitcoin helped revolutionize digital currency because it utilized blockchain as the public ledger for its transactions.

According to Riot Blockchain’s official website, the company has launched its own bitcoin mining operation and intends to “gain exposure to the blockchain ecosystem through targeted investments in the sector, with a primary focus on the bitcoin and Ethereum blockchains.”

Riot’s first move under the new name was to invest in Coinsquare Ltd., a Canadian company that operates an online cryptocurrency exchange. Riot also boasts stakes in Tesspay, a blockchain-based escrow service for wholesale telecom carriers, as well as Verady, a cryptocurrency accounting service.

In the near term, Riot Blockchain will face questions related to debt and revenue. The sale of the company’s Bioptix assets might have generated some cash, but after a problematic acquisition and a minimal revenue year, Riot is likely deep in the red.

Nevertheless, management has already made some attempts to answer its critics. On Tuesday, Riot announced that it appointed Frank M. Bishop, a former top executive at Invesco (NYSE:IVZ) , to its advisory board.

Bishop’s experience at one of the world’s largest investment management companies should be valuable, and his appointment could add legitimacy to Riot’s new business direction. Still, with share prices skyrocketing, investors will want to see results fast.

Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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