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Early Returns Show Lack of Support for Support.com in Reverse Merger


Investors in Support.com (NASDAQ:SPRT) were hoping for a better reaction as the company completed its merger with Greenidge Generation Holdings (NASDAQ:GREE). However, shares of GREE stock have dropped 60% since the combined company began trading on Sept. 15.

a crypto mining rig
Source: Mark Agnor / Shutterstock.com

As with many things, perspective is everything when looking at the rapid drop. The day before the merger was announced in March, SPRT stock was selling for $2.14 per share. Today, GREE stock is trading at over $39 per share. Simply put, if you had bought shares of the then-SPRT stock when the merger was announced in March, you’re killing it.

The question now is whether it’s time to head for the exit. Time will tell. This is a situation where Greenidge seems to be the one bringing everything to the party. And while it’s in a field that looks attractive; it’s also a field that’s filled with controversy.

GREE Stock Is a One-Sided Union

In most mergers, there’s an obvious synergy between the two companies that is readily apparent. But there’s very little about this merger that makes sense. Greenidge and Support.com don’t have complementary industries. By this I mean that it’s not like Greenidge is delivering clients to help boost revenue for Support.com. And for its part Support.com has nothing to do with blockchain technology or bitcoin mining.

Yet this is what investors are left with, and it’s fair to wonder how this will go. Will Ashworth described this union as a “Hail Mary” pass for Support.com, and I agree. The writing seemed to be on the wall. Revenue is at 10-year lows and was declining before the pandemic started. The decline in revenue has only accelerated since that time.

And as Muslim Farooque detailed, much of Support.com’s business comes from just a handful of clients. The impact of losing just one client could effectively bring the company’s already declining revenue to miniscule levels. To say nothing of its profits which have disappeared.

Play on Clean Energy 

For its part, Greenidge Generation Holdings is an alternative energy producer and cryptocurrency mining company. The company’s website cites that “Approximately two-thirds of the electricity at the site is sourced from zero carbon sources.” 

The site in question is the company’s Dresden, New York power generation facilityHere again, I’ll refer you to a different article that Ashworth wrote about GREE stock. In the article, you’ll see that the company’s claim of being cleaner and greener is already under attack. And, as Ashworth notes, if the environmental lobby gets the funding to press its case, the outlook for Greenidge (and by extension Support.com) could look very different than the optimism that the company expresses. 

Let Time Cast Deciding Vote

As I’m writing this, we’re heading into the second week of the National Football League (NFL) season. And as every NFL fan knows, the overreactions after one game are voluminous, and usually wrong. That’s the price we pay for living in a society that values the hot take more than we value the right take. 

For both the NFL and with GREE stock, time is always the equalizer. As I wrote earlier, this merger doesn’t make a lot of sense to me. But it doesn’t have to make sense to me. It has to make sense to the companies involved. So investors should take time to allow GREE stock to go through a price discovery phase.

However, that doesn’t mean you have to buy the stock right now. GREE stock is trading at a premium to established crypto miners such as Riot Blockchain (NASDAQ:RIOT) at $29.12 and Marathon Digital Holdings (NASDAQ:MARA) at $35.71. We’ll know more about the valuation when the company reports earnings later this year.

Until then, my advice is to wait and see. Let’s see what the vision of the combined companies will be, which really seems to be a question of what the future for Greenidge will be. Either way, this is a stock you should wait on.

On the date of publication, Chris Markoch 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.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.

Article printed from InvestorPlace Media, https://investorplace.com/2021/09/gree-stock-lacks-support-in-days-after-merger/.

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