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Greenidge Generation Holdings (NASDAQ:GREE) is a player in the Bitcoin (CCC:BTC-USD) mining industry that came to my attention recently. The company listed on the Nasdaq exchange through a merger with meme favorite Support.com. The merger news may have been a disappointment with Reddit traders hoping to take what was SPRT stock "to the moon".

This is quite evident by how GREE stock has traded thus far. After debuting on the market. it immediately went on to shed 58% of its value. It then proceeded to generate more pain for its investors by continuing to trend downward ever since, closing at $25.40 on Oct. 6.

However, investors who bought early shouldn't lament too much. In my view, their newly acquired GREE stock may be a better value in the long term. Greenidge is one of the more interesting plays in the Bitcoin mining industry.

Vertically Integrated Model Underpins GREE Stock

What makes GREE stock unique among players in the industry is its vertically integrated business model. Unlike other miners, Greenidge owns its own power supply via its 106-MW natural gas power generation facility. As you may know, Bitcoin takes a lot of energy to mine. It was estimated that worldwide Bitcoin activity consumes more electricity than the entire country of Argentina.

In this industry, energy is the only variable cost. Therefore miners typically relocate to areas with the lowest energy costs. By not having a captive supply, Bitcoin miners bear the risks of electricity price hikes in their areas.

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According to the U.S. Energy Information Administration, "[while] the energy mix available within a state will play a large role in state electricity prices, energy-limiting policies in some states act to artificially elevate prices, making the price of electricity much higher for consumers and businesses."

By operating its own power supply, Greenidge avoids relying on third-party agreements which could be variable price clauses or subject to renegotiation. Greenidge's direct power supply is also cheaper because it is considered "behind-the-meter".

In other words, Greenidge does not have to pay transmission and distribution fees to local utilities for its energy. This effectively gives Greenidge a stable and cost-effective energy source for its Bitcoin mining operations.

GREE Stock is Reasonably Valued

As of July 31, the company's bitcoin mining operations consumed approximately 41 MW of electricity. The rest of the 106 MW of power generated was sold to New York state's power grid. In other words, the company still has plenty of room to grow its operations.

Greenidge generates enough electricity on its own to essentially double its Bitcoin mining operations.

Looking at the company's operations, in the three months ended June 2021, the company had $16.2 million in revenue. Adding the revenues of Support.com, this would be a total of $24.6 million in revenue. Annualizing this figure and taking into consideration GREE stock's market cap of $987 million, the company is trading at a price-to-sales ratio of approximately 10.

In my view, GREE stock is trading at a reasonable valuation for investors who are bullish on the long-term potential of Bitcoin. For reference Riot Blockchain (NASDAQ:RIOT) and Marathon Digital (NASDAQ:MARA) are trading at much loftier valuations. RIOT stock and MARA stock are trading at a P/S ratio of 40x and 82x respectively.

Investor Takeaway

Its vertically integrated model makes Greenidge an attractive alternative play for investors who seek exposure in Bitcoin. Greenidge has a cost of power of $22 per MWh compared to Marathon's $28. The company also has a similar hash rate of 1.1 EH/s compared to Riot's 1.1 EH/s and Marathon's 1.4 EH/s.

The valuation multiple difference then between GREE stock and other BTC miners does not make much sense to me. I believe that this market inefficiency is due to the fallout of SPRT's previous meme stock status. Therefore at current levels, GREE stock is an interesting Bitcoin play.

On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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