Support.com (NASDAQ:SPRT) is known as a remote help desk provider. For a number of years, that business did reasonably well, and SPRT stock largely flew under traders’ radar.
Then along came 2021, and everything went haywire. For one thing, the company’s announcement that it was merging with a cryptocurrency-focused business forced Support.com’s stakeholders to reconsider their positions.
As if all that weren’t enough, SPRT stock shot out of penny-stock territory like a cannonball. The rally occurred without warning and, it could be argued, without justification.
Unless, of course, we consider a retail-fueled short squeeze to be a valid justification. But it must be asked whether this is a solid reason for serious investors to own SPRT stock.
A Closer Look at SPRT Stock
Maybe I’m just bitter because I miss the good old days, when SPRT stock traded in a predictable range between $2 and $3. That range held firm from 2016 until just a few months ago.
Then in March of this year, the share price suddenly rocketed from around $2 to more than $7.
For that, I’ll blame a major merger announcement (which I will examine in a moment), though Reddit users may also have been a contributing factor.
That pop was followed by a precipitous drop, with SPRT stock declining back to $2 and change in May. Easy come, easy go, as they say.
Fast-forward to July, and the stock shot up past $7 again. At one point, it even reached a 52-week high of $9.45.
As expected, InvestorPlace contributor William White was hot on the trail of this surge.
He reported that, likely due to a retail-fueled short squeeze, SPRT stock had soared on extra-heavy trading volume.
Think Before You Buy
But here’s the thing. I looked under the hood and saw that Support.com’s trailing 12-month earnings per share is -10 cents.
This makes it hard to rationalize the crazy price action of SPRT stock. Short squeezes don’t last forever, and the Q1 pop-and- drop should give pause to over-hyped buyers.
Plus, investors should wonder whether this is really the same Support.com they’ve known for years.
Support.com is known as a customer and technical support solutions company. It’s been around since 1997 and seems likely to benefit in the wake of the Covid-19 pandemic as companies respond to the outbreak by digitizing their businesses.
Subject to the approval of Support.com’s shareholder and other customary closing conditions, Support.com will become a wholly-owned subsidiary of Greenidge upon the closing of the proposed transaction.
A Jarring Transition
As I just stated, Support.com’s shareholders will need to approve this merger. Yet somehow, it still feels as if this is all happening whether the owners of SPRT stock like it or not.
Maybe some folks were perfectly happy investing in a company that focuses solely on being a remote help-desk provider.
And perhaps many investors wanted to buy the stock at $2 rather than at $7, $8 or $9.
But it’s too late for any of that. It looks like the train has already left the station, and there’s no turning back now.
All I’m saying is, the transition feels jarring and hasty. The holders of SPRT stock will now have to be on board with a major stake in crypto mining or get off at the next stop.
And they’ll have to decide whether it makes sense to continue to hold a stock which just tripled. Indeed, some serious mental gymnastics are required to justify that.
The Bottom Line
Some folks will cheer the merger announcement.
Others will say that the massive jump of SPRT stock is bullish.
I respect those opinions. For the time being, though – and in light of the company’s rather abrupt business transition – I’ll just adopt a wait-and-see attitude with Support.com.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.