Shares of Bitcoin mining company IREN, formerly known as Iris Energy, tumbled by 24% on the Nasdaq following a report from short-seller firm Culper Research.

The paper, released on July 11, labeled the company as wildly overvalued and suggested its stock should be valued 52-79% lower than its current market price.

HPC Plans and Underinvesting

Following the report, according to Google Finance data, IREN’s shares fell 24.5% to $10.36 before partially recovering to $11.20 by the end of trading hours.

Culper Research accused the company of making grandiose claims about its high-performance computing (HPC) plans while underinvesting in the necessary infrastructure.

“IREN talks a big game of its HPC plans but ultimately seems entirely disinterested in actually doing what it takes to compete in the space,” the report stated.

Culper noted that the company had spent less than $1 million per megawatt to build its current data center. Developing an HPC-ready data center is estimated to cost between $10 to $20 million per megawatt. “To analogize, IREN claims that it’s set to win the Monaco Grand Prix, but just arrived to the track in a Toyota Prius,” the report stated.

Further allegations pointed to discrepancies in IREN’s valuation of undeveloped land and power agreements. According to Culper, IREN claimed these assets were worth $5 to $12 million per megawatt despite spending only $4.7 million for its 1,400 MW West Texas interconnection deposit.

Culper accused IREN of misquoting a Morgan Stanley research note that referred to the value of fully built infrastructure, not undeveloped assets. The note estimated ground-up development costs at $12 million per megawatt, far exceeding IREN’s reported spending.

Culper Research Says IREN is Overvalued

Culpers report also highlighted discrepancies in IRENs valuation compared to its peers. While IREN trades at $7.6 million per megawatt, recent industry mergers and acquisitions, such as CoreWeave’s bid for Core Scientific and CleanSpark’s offer for GRIID, were valued at lower figures ranging from $2.3 million to $2.8 million per megawatt. If IRENs valuation aligned with these figures, its shares could drop by as much as 55%.

The report scrutinized IRENs crypto mining operations, “We ascribe $0 to $100 million in value to the Company’s crypto mining operations, which again we feel is generous given that the business has historically burned cash,” Culper said.

Culper also pointed out IRENs failure to meet its hashrate targets, achieving only 5.5 exahashes per second by April 2023, failing to reach its goal of 10 exahashes per second. The report also talked of insider selling by IREN’s co-CEOs, Daniel and Will Roberts, since February 2024, which may have fueled investor concerns.