INTRO
The upcoming merger of Support.com and Greenidge in the 3rd quarter must, according to all rules of the market, lead to a massive price increase.
In this DD I will show you why this is the case, based on the company data, the annual reports and the balance sheets of the companies. All my theses I will provide with the original sources of the companies, so that all data can be checked/confirmed by yourself.
I will try to keep it short, but still want to give you a good overall view.
COMPANY PROFILES
This merger involves the two companies Support.com and Greenidge. Below is a brief overview.
Support.com, as the name suggests, provides technical and customer support services. They are currently expanding into on-demand fintech and cryptocurrency support to meet the growing demand in the segment.
Fittingly, they have agreed to merge with Greenigde. This merger is not a rumor or in talks, but is already final and will be executed in Q3. [1]
Greenidge is a bitcoin miner that operates its own green power plant in Upstate New York. This is a special feature, because green energy is becoming more and more important in the crypto sector and mining, the process of "creating" bitcoin, is based on computationally intensive processes that require a lot of energy. Through their own green gas power plant, they can operate very profitably, and are far ahead of the competition.
Through the merger, Greenidge will be publicly tradable via Support.com.
WHY SHOULD THE SHARE PRICE RISE?
Currently the market cap of SPRT is about $100M USD, after the merger within the next months (no exact date yet, only Q3 is known [1]), the market cap will be about $1.6B, if we assume a price of $5 USD per share.
This is based on this formula:
5 USD (share price) \ 38M (outstanding shares) / 0.12388 (merge ratio) = ~1.6B (market cap after merger)*
Since the merger has been finally decided but not executed yet, the current ticker SPRT only considers support.com. Hence the current low market cap.
Therefore, for the time being, we only take a closer look at support's assets.
SUPPORT AS A SOLID BASE
Support.com currently holds 40M USD net cash. Net cash is cash that sits in the company after all deductions. After taxes, expenses and liabilities. Pure earned assets.
In addition, there are of course other assets such as real estate, hardware and the like that currently come to a value of 39M USD.
| NET CASH | TOTAL ASSETS | TOTAL VALUE |
|---|---|---|
| 40M USD | 39M USD | 79M USD |
So if you were to liquidate the company now, you could realize cash withdrawals and realizations of 79M USD [2]. That doesn't take into account customer data, business relationships, future profits, existing contracts, etc. pp. All these things that actually contribute to the value of a company.
As a reminder, the market cap is ~100M USD. That means just the pure assets of just that one company is almost identical to the current valuation. And that doesn't even include the value of Greenidge.
If you think I have a point here, just wait and see. Because the real kicker is what Greenidge brings to the table.
GREENIDGE AS A MULTIPLIER
Greenidge can't be traded publicly yet (hence the merger) and is therefore still grossly undervalued compared to its direct competitors (e.g. RIOT). The nice thing is, you can compare these values very accurate because mining is really only about the hashrate. With this you can see how profitable a miner is running and where its market value is.
The hashrate of RIOT (the direct competitor) is 1.1 EH/s with 43MW and the expected output of SPRT should be 41MW and at the end of the year 45MW.
Why should be and not is? There was a ban in New York State on power plants being used for bitcoin mining. This ban has now been lifted and 100% of the juice can go to mining. [3]
That means Greenidge's performance is really ramping up lately. I did a detailed comparison of Greenidge with its two main competitors MARA and RIOT and researched and compared all the data by hand. Please check out this thread for that https://www.reddit.com/r/pennystocks/comments/o0l0ra/i_compared_sprt_with_its_two_main_competitors/
Here is just the table that shows the core values in comparison
| STOCK | Marathon Digital Holding (MARA) | Riot Blockchain Inc. (RIOT) | Greenidge / Support (SPRT) |
|---|---|---|---|
| TRADING AT | ~$30 USD | ~$35 USD | ~$4 USD |
| MARKET CAP | $2.9B USD | $3.35B USD | $1.6B USD (combined) |
| HASH RATE | 1.46 EH/s | 1 EH/s | 1.1 EH/s [B] |
| MINING COST | $28 MWh | unknown [A] | $22 MWh |
| REVENUE 2020 | $4.4M USD | $3.9M USD | $12M [C] |
| MINTED BTC 2020 | 254 BTC [D] | 1,005 BTC | 1,186 BTC |
| SOURCE | https://ir.marathondh.com/news-events/press-releases/detail/1240/marathon-reports-first-quarter-2021-results | https://www.riotblockchain.com/news-media/press-releases/detail/101/riot-blockchain-announces-financial-highlights-for-the | https://corporate.support.com/wp-content/uploads/2021/03/Greenidge-SPRT-Merger-Release-FINAL.pdf |
[A] no data found for that but they relocated to Massena, New York to reduce costs. The good news - Greenridges Power Plant is already located in NY.
[B] will increase to 2.6 EH/s in 2022 (expansion is already fully funded)
[C] this is only Greenidge though. Combined with support.com 2020 revenue of $44M it totals to $56M. The net cash of both companies combined is $70M USD. Net cash!!
[D] but they bought 4,812.66 BTC end of 2020 for a total of $150M USD. So they are holding a lot of BTC but did not mined it.
As I said, please check out the link to my detailed comparison (https://www.reddit.com/r/pennystocks/comments/o0l0ra/i_compared_sprt_with_its_two_main_competitors/) but from this data alone you can see that Greenidge is actually superior to its competitors in every aspect, mines more efficiently, generates more bitcoins and even makes more profit, but still only reaches half of the market cap.
If we now take into account the current valuation of Support plus the value Greenidge brings to the table, I think the market cap would have to at least double to be valued similarly to its direct competitors. Accordingly, the share price would have to rise from 5 USD to 10 USD.
with a similar market cap close to the competition, the price rises to at least 10 USD
POTENTIAL
I don't want to scare you off by saying that this price is even too low but my honest personal opinion is that this is even too conservatively calculated.
Greenidge will be the first US listed miner with its own 100% ecological green-energy power plant [4]. Green energy is an ever-burgeoning topic in the crypto discussion and is becoming more and more important. Elon Musk [5] brought the topic up again a few days ago when he announced that Tesla will accept BTC again if 50% of the miners are green. Greenidge is completely CO2 neutral [6].
Both companies are still growing (Greenidge more than Support) and have a nice roadmap with many interesting points. However, in this analysis, I have not considered the future prospects. If you take into account that Greenidge is still expanding its power plant (so it can further extend its lead in energy costs and capacity) and plans to expand its hashrate to 2.6 EH/s by 2022, you can see where the journey is going.
the roadmap shows there is great ambition
If one then also assumes that Bitcoin prices will tend to rise, then of course the revenue will rise even further.
As I said, it's important to me that you understand that all of these future projections are not included in the above calculation at all. There we are talking about the financial statements and balance sheets of the companies. All data is based on the real data and is not fantasy dollars, rumors or possible outlooks but only facts.
CONCLUSION
I am bullish. That's for sure. But I'm not connected to the companies or anything. I didn't know either company before doing my research. I formed my opinion independently and spent days going through press releases, financial statements and balance sheets to research all the data directly at the source.
I have been invested for a few days, but I am not a financial expert. I share with you my findings because I am personally convinced of them. I invite you to discuss and I have linked you some relevant sources to verify what I wrote and to make your own decisions.
In my opinion, the share price has to go up. All the facts are in favor of it. Why it has not exploded yet has two reasons in my opinion.
- no hype
- the stock is massively shorted by institutions. More than almost any other stock.
See this screenshots with filters visible to rebuild the view on Yahoo for yourself.
Look at how much the short float increased in the last weeks. This stock is artificially held down. Maybe until the merger took place, I don't know yet but I am already investigating it and start to see a pattern. Again, you can look at the short float increase at yahoo or any other tool.
pay special attention to the red line that is showing the rising short % of float
Within the next days I will make a dedicated post about the short situation of this stock but again, that is not what this is about. In this DD I only focused on hard facts and validation.
I look forward to discuss with you!
SOURCES
[1] Merger Agreement https://www.sec.gov/Archives/edgar/data/1104855/000119312521091327/d131914d425.htm
[2] Net Cash / Assets Support https://www.investing.com/equities/support.com-financial-summary
[3] Crypto Mining Bill NY https://www.coindesk.com/new-york-crypto-mining-bill-dies-in-assembly-after-passing-state-senate
[4] official merger announcement https://corporate.support.com/wp-content/uploads/2021/03/Greenidge-SPRT-Merger-Announcement-032221-FINAL.pdf
[5] Elon Musk Green-Energy https://www.businessinsider.com/elon-musk-bitcoin-tesla-payment-green-energy-environment-2021-6
[6] Greenidge carbon neutral https://www.prnewswire.com/news-releases/greenidge-generation-bitcoin-mining-operation-to-be-carbon-neutral-in-2021-and-beyond-301291782.html
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