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Support.com Stock Price Soars Thanks to Short Squeeze

Shares in technical support services provider Support.com have jumped more than 300% in the past 10 days as retail investors mass purchase shares and force a ‘short squeeze’ that will drive stock prices higher as deep-pocketed short sellers attempt to limit losses.

Small time investors, who share information of their bets on a Reddit forum called Wallstreetbets, are behind the meteoric rise in the stock price, say analysts.

Some 60% of Support.com’s stocks have been sold short, meaning that investors who ‘borrowed’ and then sold the stock, believe the stock price will continue to fall and allow them to buy stocks back at a lower price. However, if the stock price suddenly rises, they are forced to buy more stocks to cover their position, propelling a cycle that pushes prices up further and creates the ‘short squeeze’.

Support.com has suffered a 29% decline in revenue in the past year, but its share price has increased 20 fold during the same period.

The Wilmington, Delaware-based company posted $0.8 million in net loss for the second quarter of 2021, as its revenue decreased by US$2.5 million, or 23%, compared to the same quarter in the previous year.

The board of directors are scheduled to meet on September 10th to vote on plans to merge the company with Greenidge Generation Holdings, a Dresden, NY- based Bitcoin miner and owner of natural gas power plants.

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If they approve the deal, Support.com will become a wholly-owned subsidiary of Greenidge.

Jeffrey Kirt, a former managing partner at private investment company Fifth Lake Management, will become the CEO of the combined firm. Lance Rosenzweig, a BPO industry veteran who also served as CEO for Startek, will continue to lead Support.com, according to the company’s statement.

The Short Squeeze

The tech support vendor is not the first to be selected as a so-called “meme stock” by users of Reddit’s WallStreetBets.

Earlier this year, retail investors pumped so much money into GameStop stocks that at one point the loss-making high street video games retailer was some US$10 billion, more than US aviation company American Airlines.

The retail investors, according to CNBC, foresaw an opportunity to cause a similar short squeeze, as they found the Support.com shares heavily shorted.

Most of these short sellers are believed to be institutional investors or hedge funds.

US hedge fund Melvin Capital lost billions of dollars in GameStop short squeeze, according to reports.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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