Greenidge’s Plans to Take Bitcoin Mining Operations Public Gets Major Boost As Shareholders Vote to Merge — But Regulatory Blowback Looms

DRESDEN, Sept. 10, 2021 — Greenidge Generation’s plan to become a Bitcoin mining giant got a major boost today when shareholders of voted to approve a merger designed to take Greenidge public.

Greenidge told potential investors in March that it planned to install Bitcoin mining machines that draw “at least” 500 Megawatts of electric power by 2025 — without hinting at potential regulatory blowback. It has acknowledged that its earnings will be highly dependent on the market price of Bitcoin.

The vote clears the way for Greenidge to become a publicly traded stock on the NASDAQ exchange (ticker symbol: GREE), allowing it to tap shareholder funds to expand cryptocurrency mining operations 10-fold or more at various sites by 2025. 

However, that energy-intensive buildout is apt to face regulatory headwinds because the new greenhouse gas emissions load it would create runs afoul of New York State’s 2019 law addressing climate change.

DEC’s Basil Seggos

Earlier this week, Basil Seggos, commissioner of the state Department of Environmental Conservation tweeted: “Greenidge has not shown compliance with NY’s Climate Law (the Climate Leadership and Community Protection Act, or CLCPA).”

The DEC is currently reviewing Greenidge’s application to renew its air emissions permits, which expired Sept. 6.

Sen. Kirsten Gillibrand (D-NY) has asked the U.S. Environmental Protection Agency to exert oversight of Greenidge’s efforts to obtain those air permit renewals.

U.S. Sen. Kirsten Gillibrand (D-NY)

Locally, Yvonne Taylor, vice president of Seneca Lake Guardian, applauded Seggos and Gillibrand. “We must regulate this emerging industry so that communities across the U.S. can reduce harmful greenhouse gas emissions and adhere to the vital climate change initiatives being rolled out both statewide and nationally,” Taylor said in a press release.

But today’s shareholder vote is a big win for the company, and Atlas Holdings, the Connecticut private equity company that acquired the Dresden plant in 2014 when it was a mothballed coal facility. Atlas converted the plant to burn natural gas in 2017 and launched its Bitcoin mining operation in 2019.

Entities associated with Atlas will control nearly 70 percent of the merged company, while shareholders will get only about 8 percent, and will become a Greenidge subsidiary — secondary status compared to the planned Bitcoin mining buildup.

The merger is set to close before the end of October, possibly weeks earlier.

Greenidge officials have touted plans to rapidly expand Bitcoin mining operations at their power plant in Dresden and other locations, raising the energy needed to power their network of specialty computers from 19 megawatts earlier this year to 500 MW or more within four years.

New mining rigs at the Dresden plant boosted energy needs to 41 MW as of July 31, and the company says those power requirements will rise to 85 MW next year.

Meanwhile, Greenidge has announced plans to launch a new Bitcoin mining operation in South Carolina and hinted that other mining locations will be announced in coming months. But the South Carolina project hasn’t launched.

The company’s touted Bitcoin mining buildout — and the projected earnings it has told investors to expect — assume that regulators don’t order a halt, or at least a pause, due to its environmental consequences.

In a letter to the DEC in August, a consultant for Greenidge projected CO2-e emissions, both at the Dresden plant and at the “upstream” sources of its natural gas fuel. The total of 952,968 metric tons per year far exceeds the limit requested in its air permit renewal application.

The DEC has invited the public to comment on Greenidge’s application to renew its air permits, and it has scheduled a virtual public hearing on the case for Oct. 13. 

Meanwhile, Gillibrand has written to EPA Commissioner Michael Regan:

“I urge the EPA to exercise its oversight powers under the Clean Air Act and involve itself in the DEC’s review of Greenidge Generation’s permit to fully assess the potential consequences of the plant’s Bitcoin mining operations and the effect on local emissions and air quality.”

Under its expired Title V air permit, Greenidge was allowed to emit 641,878 tons of CO2-equivalent gasses per year. Its permit renewal application does not propose to change that limit. However, the company estimates that its current annual onsite and upstream CO2-e emissions will total 1.05 million tons (952,968 metric tons) — more than 60 percent above the limit in its renewal application.

While the environmental concerns hover over the company’s aggressive expansion plans, the market has responded with enthusiasm to the planned merger.

Shares of traded around $2 on the trading day before the deal was announced in March.  After trading in the $4 range through mid-July, the stock has soared in recent weeks — once hitting a mid-day high of more than $50.

Market analysts have speculated that the cause of that surge had less to do with Greenidge’s Bitcoin mining prospects than the vagaries of “short-selling” shares.

In a short sale, an investor borrows shares and then sells them with the promise to buy them back in the future. It is a bet the stock price will fall. 

Available shares of have been overwhelmingly “shorted” in recent weeks, primarily by large institutional investors.

As Greenidge adds specialized computers, or “rigs,” its hash rate (computing power to win Bitcoin prizes) rises. The company projects a big jump in its hash rate next year, if it can successfully install the new equipment.

Earlier this year, retail investors tried to exploit cases where a high percentage of company’s shares are shorted, such as GameStop. Such “meme stocks” often soar in value.

By buying in as a group, the retail investors attempt to drive the target company’s share price higher and force the short sellers to buy at much higher prices. 

If they succeed, they can create a “short squeeze,” where those forced purchases create a cycle that drives the shares still higher. 

Several commentators have cited as a prime candidate for a short squeeze because of its exceptionally high percentage of short sellers.

However, shares have been highly volatile. Surges have been followed by collapses. Shares closed Friday at $21, down $5.02, or 19.3 percent. 

But if shares hold steady around $20, the implied price of GREE when it goes public could be in the $100-$150 range, depending on the final share exchange ratio. The company’s value (market capital) could exceed $5 billion, or far more if the price of Bitcoin surges.

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