With its much-followed reverse merger complete, Greenidge Generation (NASDAQ:GREE), previously Support.com stock, is no longer a hot short-squeeze play. It’s an understatement to say that’s been bad news for investors who dived into this when it was going on its epic run-up a few weeks back.
With SPRT stock converting into 0.115 shares of GREE stock when the deal closed Sep 14, what traded for as much as $59.69 per share is now worth an adjusted $4.16 per share (based on GREE’s current price of $36.14 per share).
That said, once it finds its floor, you may want to consider buying it. As I’ve discussed before, this may be the best of the publicly-traded Bitcoin (CCC:BTC-USD) mining names. Once it makes another big move lower, the opportunity to buy what’s a higher-quality play in this space at a reasonable price could open up.
The problem? It’s unclear when the dust will settle. Between retail investors cashing out, and the price of BTC trending lower, it may be best to wait for these factors to pass before buying.
Floundering Out of the Gate, GREE Stock Could Continue to Dip
Since last week’s merger close, Greenidge Generation has been trending lower, since debuting at $57 per share. What’s behind this? Two factors. First, shareholders of the former SPRT stock dumping their shares. After the big losses seen from this event, it’s no surprise they’re looking to throw in the towel and move on.
Second, the recent pullback in BTC prices. Fears of increased regulation, plus the uncertainties hanging over financial markets in-general, are compelling many to take profit. This also makes sense, after crypto’s incredible comeback over the past few months. Unfortunately, both these issues could continue to put pressure on GREE stock.
If Bitcoin keeps falling? Greenidge’s valuation will likely take another hit, as the chances of it hitting its 2022 projections become murky. If stocks continue to sell-off, or perhaps go into correction mode? Expect this speculative play to make further big moves lower.
This means diving into it now is a move not worth making. What you think is a “buy the dip” situation, could easily be a “falling knife” situation in hindsight. However, don’t take this to mean it’s a situation to write off completely. Once these pressures clear up, it may become a worthwhile, albeit still-risky, opportunity.
Why You May Want to Buy it After The Dust Settles
GREE stock may be a buy once it slides again, and settles at lower price levels. Why? Besides the market-related issues discussed above, another factor that makes it unappealing now is its rich valuation. Based on the deal terms (38.36 million outstanding shares after closing), the combined entity’s market capitalization currently stands at around $1.39 billion.
Valuation is less frothy now than it was when SPRT stock was the top short-squeeze play among “meme stock” investors. But it’s still a bit pricey, given that the company (assuming BTC trades around $49,000 next year) projects revenue of just $145 million, and EBITDA of $109 million (based on numbers from its merger presentation).
However if it drops enough, this issue will clear up as well. With valuation worries out of the way, coupled with advantages like ownership of its electrical power source, and net operating losses (NOLs) it received from the Support.com merger? This may make for a better crypto mining play than its main publicly-traded peers, Marathon Digital (NASDAQ:MARA), and Riot Blockchain (NASDAQ:RIOT). Just keep in mind that it’ll still be a risky play, even after another high double-digit percentage price decline.
Why? Bitcoin mining operations are anything but a license to print money. Their future success hinges on BTC trading at or above its current levels. Factors like an increasing difficulty rate for mining could also negatively affect profitability. On top of this, there may be a company-specific concern that could damage the bull case for it as well. As my InvestorPlace colleague Will Ashworth discussed recently, concerns about the environmental impact of its power plant in upstate New York could mean it’s key advantage (control over its electricity costs) is under threat.
It’s Worth a Look at Lower Prices, But Sit Out on Greenidge For Now
As it’s dropping like a hot potato, there’s no reason to “buy the dip” with Greenidge Generation stock. Once valuation becomes more reasonable? This, along with its underlying qualities, may make it a better bet on crypto mining than MARA or RIOT stock. But even after its continued decline, the dust has yet to settle.
“Meme stock” investors who bought this pre-merger were burned badly. Buy GREE stock too soon, and the same may happen to you.
On the date of publication, Thomas Niel held a long position in Bitcoin. He 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.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
