After a double-digit percentage decline in Tuesday’s trading, shares of Support.com (NASDAQ:SPRT) are falling again. The stock was down by roughly 19% in Wednesday’s session as of 2 p.m. EDT.
There didn’t appear to be any business-specific news driving the sell-off. Support.com has in the past couple of weeks emerged as the latest “meme stock,” delivering incredible gains as traders bought its shares in hopes of benefiting from short-squeeze momentum. The stock skyrocketed, and even after its retreat from its peak is still up big in 2021, so it’s not surprising to see it giving up more ground.
Despite a sharp pullback over the last few days, Support.com stock is still up roughly 1,110% this year.
Support.com’s poor business performance and uninspiring outlook caused short-sellers to bet against the stock. However, the surge of new buying from WallStreetsBets users and other retail investors has driven the price higher. That, in turn, left short-sellers needing to buy back the shares they had sold short in order to stem their losses — driving the company’s stock price still higher. So, while the stock has recently given up some gains, those who bet on the short squeeze have enjoyed fantastic returns so far.
Reddit’s WallStreetBets board and other investing-focused social media communities have emerged as market-moving power centers. Many of the traders who participate in them favor beaten-down, highly shorted companies that could be capable of posting huge short-term stock gains if enough people buy and hold onto shares.
In addition to the short-squeeze momentum, some traders are bullish about a potential push by Support.com into the cryptocurrency mining space. On Sept. 10, its shareholders will vote on whether the company should merge with Bitcoin mining specialist Greenidge Generation.
Support.com’s customer service, technical support, and security operations have been struggling, and a pivot to Bitcoin mining operations could open the door for a business turnaround. On the other hand, the stock is currently trading at levels that appear to be divorced from the company’s fundamentals even if some potential benefits of that pivot are taken into account. For better or worse, the stock’s near-term pricing action will likely hinge on the extent to which it remains in favor with meme-focused investors.
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