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Dilution Risk Based on Iren Energy Stock

Hi everyone,

Over the past few months, I've had discussions with some people here on the forum about $IREN (+2,72%) and expressed my serious concerns about the constant and extreme dilution. My stance on this report therefore remains decidedly skeptical and negative. Since the stock price has recently lost noticeable momentum and is trading sideways or declining, I’d like to take this opportunity to once again examine the risk I mentioned back then in detail and highlight why this should set off real alarm bells.

First things first: I am expressly NOT criticizing the business model here! The expansion into AI cloud infrastructure and data centers is exciting and certainly has tremendous potential. What I do sharply criticize, however, is solely the method of raising capital. And I see this as an absolute threat to the company’s continued existence as an independent entity.

Lately, I’ve been seeing more and more polls on the forum where $IREN (+2,72%) it regularly ranks first in a selection of 10 stocks—sometimes with over 50% approval. This is completely incomprehensible to me. New investors, in particular, are blinded by the narrative and add the stock to their portfolios with far too large a weighting, without understanding the risk involved.

The Financing Method: Constant Stock Issuance via Subscription

To pay for the construction of data centers and expensive Nvidia GPUs, $IREN (+2,72%) one thing above all else: $IREN (+2,72%) it continuously issues new shares. What’s unique—and dangerous—about this is that the company repeatedly seeks approval to issue new shares at intervals of just a few months. It’s essentially a permanently running dilution machine.

* When stock prices rise: No problem. Only a few shares need to be issued to raise fresh capital. The price goes up, and everyone is happy.

* When stock prices stagnate or fall: This is where the trap snaps shut. The lower the price falls—or the longer it remains at a low level—the more shares the company must issue to meet the same capital requirements. Logically, the more shares that must be issued, the greater the dilution for existing investors. $IREN (+2,72%) Under this model, the company is entirely dependent on constantly rising stock prices and cannot afford any period of weakness.

Why Falling Stock Prices Become the Core Trap (The Calculation Example)

If $IREN (+2,72%) , for example, $500 million, the situation looks drastically different at various share prices:

* At a price of $50, 10 million new shares must be issued.

* If the price slips to 25 USD, 20 million new shares suddenly have to be dumped on the market to raise the same amount.

The result is brutal dilution. The number of shares skyrockets—exactly as we’ve seen in real-world examples of well-known negative cases.

A cautionary real-world example from history: Plug Power ($PLUG (-0,16%) )

Anyone who thinks this is just dry theory should take a look at historical hype markets:

* $PLUG (-0,16%) : To finance the construction of factories, the company continuously issued new shares. The number of outstanding shares rose from around 100 to 200 million to well over 1 billion shares! When the stock price slipped, the company had to issue ever-larger quantities of shares at low prices, which massively devalued the stock for existing investors.

The Problem with Earnings Per Share (EPS) & My Forecast

Many people focus only on total revenue or net income. But what really matters is what individual shareholders receive—namely, earnings per share (EPS). And here, a ruthless mechanism comes into play:

* The lower the stock price remains over the long term, the more shares must be issued to raise exactly the same amount of money for investments.

* Consequently, the company’s absolute profit growth must be all the higher so that all shareholders see at least slight growth in earnings per share.

If the number of shares grows rapidly faster than operating profit due to this constant flood of new shares (the classic death spiral), earnings per share will inevitably shrink—even though the company as a whole is growing.

My prediction: This is exactly what leads to a dead end. $IREN (+2,72%) At some point, the quarterly results will be extremely disappointing because operating growth simply can no longer keep pace with this astronomical rate of dilution. When the numbers then turn out to be “only” solid, while the flood of shares continues unstoppably, the house of cards will collapse. That will be the harsh end.

Conclusion

$IREN (+2,72%) does not forgive price weakness. Don’t let yourself be blinded by the hype and the regular stock recommendations or polls: A stock with this risk profile should never be overweighted in your portfolio!

17 Comentários

Get_Rich_or_Die_Tryin@Get_Rich_or_Die_Tryin

Thanks for the clear explanation.👍🏻 I think there are some people here who are fully aware of that. And then, unfortunately, there’s the general public who couldn’t care less, don’t want to see it, or simply don’t know any better and blindly follow every trend. Of course, I’ve had—and still have—a few high-risk positions in my portfolio myself, but: with the appropriate risk management and position sizing.

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Raketentoni@Raketentoni

We'd already talked about this briefly. I agree with you—I made good use of IREN to make some money and got out of all tech stocks as early as last Friday.
This whole Ring debt financing scheme is going to collapse at some point.

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value_virtuoso_3073@value_virtuoso_3073

@Raketentoni I'm also currently thinking about how to position myself, since there's more and more bad news coming in, and I'm worried about Germany, France, and how the debt situation will play out. What would you recommend to someone who's thinking long-term—just wait it out, or deliberately shift more into cash?

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Raketentoni@Raketentoni

@value_virtuoso_3073

I wouldn’t make a blanket statement like “just ride it out” or “build up as much cash as possible right now.” Risk tolerance, investment horizons, and personal circumstances vary far too much for that.

For me, the most important question to ask first would be: At what loss level can you still sleep soundly? Is 20% okay? 30%? Or do you start getting nervous at 15% and might end up selling at the bottom? A stock allocation that you can’t psychologically handle during the first sharp decline was too high from the start.

Just as important: For me, the only money that belongs in stocks is money I truly won’t need for several years. Money for emergencies, major purchases, or foreseeable expenses has no place there. Anyone who might need access to it in the short term can’t simply say, “I’ll just ride it out.” They might have to sell precisely when prices are at their lowest.

“A lot of cash” isn’t a fixed number either. For some, 10% is already a lot; for others, 30 or 50% is necessary to sleep soundly at night. I would therefore not determine the cash allocation based on how dramatic the news sounds at the moment, but rather on liquidity needs and personal risk tolerance. Anyone who sells off massive holdings out of fear will also have to make two critical decisions later on: when to get out—and when to get back in. Most often, it’s the second decision that causes people to fail.

I can understand that developments in Germany—and especially the French government debt crisis—are causing concern. For me, however, that would be more of an argument for broad international diversification than for a complete withdrawal from stocks.

Personally, I would build a solid foundation of broadly diversified ETFs, focusing on profitable, high-quality companies. More defensive sectors such as consumer staples, healthcare, or utilities can help cushion volatility to some extent—but they don’t eliminate it. Even a good ETF can drop significantly from time to time.

When it comes to individual stocks, I’d be more selective right now: resilient earnings, positive cash flow, reasonable debt levels, pricing power, and no business model that only works as long as fresh capital keeps flowing in on favorable terms.

Highly valued and capital-intensive companies like IREN or Nebius can offer enormous opportunities, but to me they clearly belong in the more speculative part of a portfolio. These are not established cash cows like Microsoft, Amazon, or Nvidia. A great deal of expectation rests on their expansion, financing, capacity utilization, and future cash flows. Especially when interest rates rise, companies with high capital requirements and significant refinancing needs become more vulnerable. Nebius, for example, raised billions via convertible bonds in 2026—that isn’t necessarily a bad thing, but it shows just how capital-intensive this expansion is.

My approach, therefore, would not be to sell everything out of fear. Rather, I would assess whether my current portfolio can withstand a 30% or 40% decline without forcing me to capitulate, either financially or emotionally. If not, I would reduce risk in a controlled manner, build up my cash reserve to a comfortable level, and reduce the weighting of speculative positions.

Cash is nothing to be ashamed of. But cash should be the result of a plan—not the result of the last five bad headlines.

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value_virtuoso_3073@value_virtuoso_3073

@Raketentoni Thank you very much for your opinion; I'll definitely look into it.

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capital_captain_2693@capital_captain_2693

Thanks for the explanation—it's very clear 👍

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DividendenPapa@DividendenPapa

That's a very accurate summary. It's perfectly fine as a deliberate risk. But you should understand what you're putting in your basket here.

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Klein-Anleger@Klein-Anleger

💯 %! Exactly! I agree with you—it’s a race against time…
Although, since part of IREN’s financing comes from advance payments from, for example, $MSFT, and the company is currently sitting on a mountain of cash, you have to be extremely careful about dilution!

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Chris@Multibagger

You're right about a lot of things, but $IREN might not be the best example, since they’ve raised a lot of capital through upfront payments and, above all, through convertible bonds—some of which won’t be converted until the 2030s at prices above $100, which could lead to significant dilution. In general, though, I agree with you that the frequent issuance of new shares by many companies can lead to an exodus.

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Olli@Olli68

@Multibagger You’re certainly right that convertible bonds with high price targets sound less risky at first glance. However, we mustn’t forget that IREN has also been actively issuing shares through ATM programs—just recently, the authorization for this was increased again to a staggering $6 billion, and in the last two years alone, this has driven the number of shares from under 70 million to well over 270 million.
Furthermore, the risk associated with convertible bonds should not be underestimated: If the conversion price is not reached, the money must ultimately be repaid. This coincides precisely with a period in the early 2030s when massive investments will once again be required in the latest generations of chips—which will then inevitably lead to new debt.
It’s all the more gratifying that we agree on the fundamental problem of constant stock issuances and the threat to earnings per share!

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Olli@Olli68

P.S.: Ultimately, it boils down to this: IREN simply cannot afford a persistently low or stagnant stock price. This is completely different from the situation with stable giants like McDonald’s, Coca-Cola, Alphabet, or Microsoft. That’s exactly what this article was meant to highlight—because with this business model, the market won’t tolerate a prolonged period of weak stock performance.

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Chris@Multibagger

@Olli68 That’s correct, and it’s similar to many biotech companies that don’t yet have commercial products. They, too, rely on upfront payments, milestone payments, and the issuance of new shares.
For investors like me, who are actively seeking opportunities for high returns, the risk mentioned is the price we pay for those higher opportunities. You just have to be aware that on the stock market, there are no opportunities for maximum returns without higher risk.
P.S.: $MCD has disqualified itself from any investment on my part, since they’re removing the MC Rib from the menu. It was the only burger I treated myself to there every now and then.😉

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Dukke@Dukke

$IREN It's not the first—and, unfortunately, not the last—hyped stock that's being heavily promoted.

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Christoph@ChrisBizz

It's good to see $IREN looked at from this perspective 👍🏻

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Code & Capital@Codeandcapital

I’ve been invested in $IREN since June 2025, with a cost basis of €9.08. I see the dilution too—you’re right about that. Anyone paying for data centers and GPUs with new shares needs rising stock prices. Otherwise, it gets expensive for existing shareholders.

But I think the comparison with $PLUG is off the mark. Plug burned through money for years without a viable business model to back it up. IREN has a contract with Microsoft worth $9.7 billion. Dilution in and of itself isn’t the problem. Things only get bad when the new capital generates less than what the new shares cost. Whether that happens can be seen in earnings per share. I look at that every quarter, along with the number of shares.

I agree with you on the weighting. IREN is a small part of my portfolio and will remain so. With a risk profile like that, I’d never put a large portion of my portfolio into it, no matter how good the story sounds.

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Olli@Olli68

@Codeandcapital Yes, they have contracts. But for now, they’re just contracts—not revenue. Even though 9.7 billion sounds like a lot, it’s not that much relative to their debt. They’d need to bring in a lot more. We’ll see...
I like that you’re keeping a close eye on the quarterly numbers. 👍 Maybe you’ll look back on this discussion someday. 😉

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Code & Capital@Codeandcapital

@Olli68 Yes, you’re right. The 9.7 billion will come in gradually over the course of the period. In the last quarter, AI cloud revenue was just over 70 million dollars—that’s still only a small portion of that total.

As for the debt, though, I’d offset it against the cash on hand. As of June 30, there was about 7.8 billion in debt against roughly 5.9 billion in cash. A large portion of that, of course, comes precisely from the convertible bonds you’re worried about.

You have a point about the number of shares. Between the balance sheet date and the annual report, it rose from 380 million to 394 million. If this continues, revenue per share will have to grow faster than the number of shares. That’s exactly what I look at every quarter. Let’s talk again in a year. But so far, I’m still up 160%.

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