 | A deeper look into $SPRT (Support.com) $SPRT is a technical support company that has been in business for more than 20 years. The company itself has a good website, decent financials, but is not really a growth business. As a result their stock price has suffered. $SPRT announced that they are merging with Greenidge Generation Holdings. Greenidge owns a natural gas plant that powers bitcoin mining rigs. Greendige also has plans for expansion in SC with nuclear energy as mentioned in one of their most recent press filings (k). Greenridge Mining: Greenridge Generation’s model revolves around its own power plant. This plant services local homes and businesses, but more importantly can be used to provide dirt cheap power for on-site crypto mining. The natural gas power station emits a fraction of the CO2 as the coal stations that power miners like Marathon Holdings (MARA), but Greenridge also offsets Carbon Emissions by purchasing carbon offsets (e). Greenridge mining is then one of the very few miners that is completely carbon neutral, which is a major selling point for institutions looking to hold miners within their portfolios. Why is owning your own power generation so beneficial for a crypto miner? To understand this you need to understand how much energy crypto currency uses. Large mining companies use a lot of power, RIOT’s Whinstone location for example generates 300 MW (f) at an average cost of 2.5 cents per kWh. Operating at full capacity this facility would cost RIOT $66 Million per year. Obviously this is the primary operating cost of running a cryptocurrency mining company, and companies are heavily focussed on decreasing this energy cost wherever possible. Cheap power can be found nearly anywhere. It is somewhat of a myth that clean energy leads to cheap power in the eyes of a major power sink like crypto mining. MARA for example, sourced a large deal with a coal fired (LOL) power plant 3.4 cents per kWh (g), and RIOTs Coinmint LLC location in New York sources power at 1.4 cents per kWh (h). So while 1.4 cents per kWh seems like the bottom for energy prices, it can be even cheaper. How do you buy the cheapest car you can? Buy the fucking factory and make it yourself. Power plants operate efficiently when they run a stable load, if you’re familiar with power demand though, this stable load isn’t possible. The charts below show the typical demand for a summer and winter day in regards to power consumption. From the perspective of a power plant, the goal is to “smooth” out the load so that production can be maintained at a certain rate. Mining companies often get contracts for their cheap power within these valleys of low demand, meaning the power plants can maintain steady supply, optimizing their plants, and the miners can get cheap power. Owning and scaling your own power station is the ULTIMATE way to smooth out this base load, as any valleys in the power demand can instantly be routed to your mining facility for next to zero cost. This means that the margin on mining is drastically increased. After scaling up their power Greenridge Generation can likely provide power as low as the largest miners in North America (a pretty amazing feat considering the size of Greenridge). As mentioned in the merger announcement (i), Greenridge has a current hashrate of 1.1 exahash per second (EH/S) that is expected to grow to 2.6 EH/s in 2022. While this is certainly less than its major competitors within the US and Canada, it is over a 200% increase in year-over-year hashrate growth. When analyzing miners it should not be forgotten that most of the major miners within North America are only blitz scaling as of this year; RIOT for example only reached 1 EH/s around March of 2021. The bullish case for mining is a quite simple one to break down. While miners generally move in tandem with the prices of bitcoin, they aren’t related in a linear way. Below is a rough chart of MARA since bitcoin’s first dump to below 30k, with MARA in blue and Bitcoin in orange. You can see that very roughly, while bitcoin formed a clear downtrend, MARA and many other large, trusted miners rose out of that capitulation to form a clear uptrend. Why the divergence? Because despite bitcoins deflated value, mining is still profitable. Disgustingly profitable. Due to Chinese miners migrating and shutting down, the global hashrate for bitcoin has dropped an enormous amount. This means that the blocks are much easier to mine as there is essentially less competition. If we look at the profitability of mining over the last few years we can see that right now we are nearly as profitable as we were when bitcoin was $64,000 (j). What this means is that miners can continue to do what they have always done. Mine as much bitcoin as they can, covering expenses and operating costs, funding as much growth into new power and hashrate as they can, and HOD as much bitcoin as they can at these levels to then sell at increased bitcoin prices. Lets try and calculate the insider and fund ownership, we can take a look at the prospectus and recent fintel data. The table below shows the insider, or fund, and how many shares they held as of the most recent filings. Market makers have not been included in this data. Shares Outstanding = 25,415,984 (a) (As of April 26, 2021) It is not possible to tell if a fund has sold since they have filed, and it is not possible to tell if they bought more. This is the only data we have to go off. Insider ownership from Fintel (b) & Prospectus (a) Totaling all these shares, we get the following numbers. 21,172,532 Insiders + Funds 25,415,984 Shares Outstanding 4,243,452 Possible Float? From current Ortex data, the estimated short interest is 5,190,000 shares. This means the float is approx 7,700,000 shares using the Ortex data. So using the Ortex data and considering insiders and funds part of the merger deal we get a float of 7.7 million shares Adding up all institutions from recent filings we get a float of 4.3 million shares It is impossible to know the actual float because we cannot determine if institutions buy/sell until they file. We can confirm that the float is somewhere between 4-8 million shares and recent Ortex data shows 5 million shares short. The stock has had a massive spread between the bid / ask for weeks now which could mean that there is a supply shortage. We have also seen wild volatility swings in the stock that would suggest the same. Let's take a look at when the shorts opened up a majority of their position. From the chart below, they started to short $SPRT since the merger announcement and kept adding through April to July The utilization is currently maxed at 100% which means there are no more shares left to short. Cost to borrow is increasing steadily which will pressure shorts, sometimes as high as 150-350% intraday. The average age on loan is increasing which shows old shorts are refusing to cover and holding their positions opened months ago. How can we be sure that the shorts are trapped and this has the potential to squeeze? Let's check some historical examples, Gamestop and AMC. GAMESTOP We see the same trend in the three variables. Utilization maxed out, Average age on loan increasing, Cost to borrow increasing. AMC And with AMC we see the same. Let's compare $SPRT to its peers Ortex Data It’s clear that for some reason, $SPRT is aggressively shorted compared to its peers. From a seeking alpha article (c) However, $SPRT publicity seems on the uptick given the Greenidge article that was on the front page of BBC this weekend. (l) The video posted on youtube already has over 100,000 views (m) It’s quite possible that the shorts knew this, and took advantage of a stock that was not well known and now they have trapped themselves. From the article (c) the author also writes $SPRT is currently and has been on the Threshold Securities list (d) many times in the past month due to Failure to Delivers, we usually see this in historical examples as well of stocks that squeeze. Lastly, there is a good podcast with Greenidge outlining the points below: https://onthebrink-podcast.com/greenidge/
Credit for this DD goes to Trancify (Thanks for letting me share) Disclaimer, obviously this is not in any way financial advice. Just hoping to have a discussion and brainstorming session based off the data I see. TLDR of Greenridge Mining**:**
TLDR of $SPRT Stock
Risk Factors
References
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