Seeking Alpha • Jul 18
Greenidge Grows Bitcoin Miner Count As Price Brakes Profits
Greenidge Generation is a power generation and Bitcoin mining company with operations in New York and South Carolina.
The company has recently brought several thousand additional Bitcoin miner computers online as it diversifies its mining facility footprint.
GREE's stock price is heavily influenced by the price of Bitcoin, which has dropped substantially from its 2021 all-time highs.
Until we see a bullish Bitcoin price rally, the firm's operating income will likely disappoint, so I'm on Hold for GREE until then.
A Quick Take On Greenidge Generation
Greenidge Generation (GREE) reported its Q1 financial results on May 16, 2022, after having gone public in a merger with Support.com in September 2021.
The company operates a power plant and has related data center operations in New York and South Carolina.
Until we see Bitcoin's price rise materially, we likely won't see much improvement in operating income, so I'm on Hold for GREE until Bitcoin's price action turns bullish.
Greenidge Overview
Connecticut-based Greenidge was founded to develop a vertically integrated Bitcoin mining and power generation company.
The firm is headed by Chief Executive Officer, Jeff Kirt, who joined the firm in March 2021 and previously was Managing Partner of Fifth Lake Management and a Partner at Pamplona Capital Management, both private investment firms.
The company seeks to use low-carbon or zero-carbon energy sources to power its Bitcoin mining facilities.
GREE owns and operates a 106-megawatt power generating facility in Dresden, New York, which originally was a coal-fired plant and has since been converted to a natural gas-burning energy plant.
The plant provides energy to neighboring communities as well as to the company's data center hosting Bitcoin mining operations.
Greenidge's Market & Competition
The global market for Bitcoin mining is currently in significant flux, with the recent bans on mining in China having caused a large amount of that country's hashpower to exit the network while those operators look for more suitable locations.
Many mining concerns have relocated to the United States, due to its more predictable regulatory and legal environment and pro-business approaches in a number of states, although certain states have been less-than-welcoming to the industry.
The market value for mining depends on the price of Bitcoin, since the majority of value going to the miner is a function of the current Bitcoin reward rate of 6.25 Bitcoin per successfully mined block.
At a price of $25,000 per Bitcoin, the annual mining rewards for the entire industry would be approximately $8.21 billion.
Major industry participants include:
Bitfarms
Argo Blockchain
DMG Blockchain
Hive Blockchain
Hut 8 Mining
HashChain Technology
DPW Holdings
Layer1 Technologies
Riot Blockchain
Marathon Patent Group
Others
Greenidge's Recent Financial Performance
Total revenue by quarter (includes Support.com data through September 2021) has grown markedly:
5 Quarter Total Revenue (Seeking Alpha)
Gross profit by quarter (includes Support.com data through September 2021) has also grown at a similar trajectory to that of total revenue:
5 Quarter Gross Profit (Seeking Alpha)
Selling, G&A expenses as a percentage of total revenue by quarter (includes Support.com data through September 2021) have varied considerably in recent quarters:
5 Quarter Selling, G&A % Of Revenue (Seeking Alpha)
Operating income by quarter (includes Support.com data through September 2021) has fluctuated materially in recent reporting periods:
5 Quarter Operating Income (Seeking Alpha)
Earnings per share (Diluted - includes Support.com data through September 2021) have varied, although the highly negative figure in Q4 2021 was due to a non-cash goodwill write-off of the Support.com business:
5 Quarter Earnings Per Share (Seeking Alpha)
Since the beginning of 2022, GREE's stock price has fallen 83 percent vs. the U.S. S&P 500 Index's fall of around 18.9 percent, as the chart below indicates:
Year-to-date Stock Price (Seeking Alpha)
Valuation Metrics For Greenidge
Below is a table of relevant capitalization and valuation figures for the company:
Measure
Amount
Enterprise Value
$182,130,000
Market Capitalization
$107,960,000
Enterprise Value/Sales ((TTM))
1.36
Price/Sales ((TTM))
0.69
Revenue Growth Rate ((TTM))
377.51%
Operating Cash Flow ((TTM))
$43,920,000
Earnings Per Share (Fully Diluted)
-$1.24
(Source - Seeking Alpha)
Commentary On Greenidge
In its last quarterly report (Source - Seeking Alpha), covering Q1 2022's results, management highlighted growth in capacity expansion at its South Carolina data center facility, which contributed 22% of the firm's hashpower.
Also, the company closed the quarter with approximately 19,600 miners in operation and orders for another $135 million worth of equipment at Bitcoin miner supplier Bitmain.