Shares of Support.com (SPRT) surged 291% in August, according to data from S&P Global Market Intelligence. The beaten-down tech and customer support stock soared after it became the latest short squeeze target favored by Reddit's WallStreetBets discussion board.
It's been the year of the meme stock, and a surprising number of 2021's best-performing equities owe their incredible performances to short squeezes and meme momentum aided by investing-focused social media communities. Support.com's struggling business and weak outlook attracted high short interest, and that primed shares for explosive gains as a rush of new investors suddenly decided they liked the stock.
Short-sellers who placed bets against Support.com had the tables turned as a swarm of investors turned bullish on the stock. The fast-rising share price spurred short-sellers to cover the stock they had shorted, which had the effect of pushing the share price even higher. It was a huge win for WallStreetBets and other investors who anticipated a squeeze, and Support.com could be headed into the beginning of a new era.
The company's shareholders are set to vote on Sept. 10 on a pending merger with Greenidge Generation. Greenidge is a New York-based Bitcoin mining company that owns a power generation plant and is opening a new facility in South Carolina. Support.com restructuring post-merger and pivoting some of its capital and resources into cryptocurrency mining initiatives could provide a path back to sales growth that might otherwise be much more difficult to orchestrate.
Support.com stock had already started to pull back at the end of August, and it's started September's trading with another big sell-off. The company's share price fell roughly 23% on the month's first day of trading.
Support.com now has a market capitalization of roughly $584 million and is valued at roughly 15 times its trailing-12-month sales. To put the company's business trajectory in context, the company's second-quarter revenue came in at $11 million -- down 34% year over year. The company ended the quarter with cash and short-term equivalents of $29.7 million and total assets valued at $39.7 million.
So, while the company would bring some resources into its potential merger with Greenidge Generation, it's not as if Support.com is bringing tons of cash to the table. Support.com may be able to leverage its elevated share price to raise funds, much as fellow meme favorite AMC Entertainment Holdings has done, but investors should move forward with the understanding that this is primarily a meme stock play with a valuation largely divorced from fundamentals.