After a big dump of 70%, still a premium of 100%? The suspense of SharpLink's ETH gamble is not over.

Original author: Fairy, ChainCatcher

Original text edited by: TB, ChainCatcher

SharpLink Gaming, hailed by the market as the “Ethereum version of MicroStrategy,” was originally riding the wave of the ETH treasury narrative, but a SEC filing caused its stock price to plummet nearly 70% in after-hours trading.

The fervor has turned into skepticism, and faith has plummeted into panic. This article will dissect this sudden “crisis of trust” and discuss the hidden picture behind it.

Misreading the Market Behind the Plunge

At the end of May, SharpLink Gaming completed a $425 million public company private investment in public equity (PIPE), with investors including established institutions heavily invested in Ethereum such as ConsenSys, Galaxy, and Pantera Capital. The funds are used to acquire ETH as reserve assets. This operation led to SharpLink’s stock price soaring to a high of $124, an increase of over 40 times compared to before the financing announcement.

Yesterday, SharpLink Gaming submitted an S-3A SR registration statement to the U.S. SEC, authorizing the resale of up to 58,699,760 shares related to PIPE financing. This means that more than 100 PIPE investors can choose to sell their holdings at their discretion.

In a moment, the market misunderstood it as “PIPE investors have begun to apply for delivery,” and panic quickly spread.

Market Misinterpretation

SharpLink’s after-hours stock price once fell to $8.75, a decline of up to 73%, before slightly rebounding to the $10 range.

Image source: yahoo!finance

Subsequently, SharpLink’s board chairman and Consensys CEO Joseph Lubin spoke out to clarify: this document is merely a routine registration process after the PIPE, aimed at “pre-registering shares for potential resale,” and does not represent any actual sale. He emphasized, “The ‘number of shares held after issuance’ in the document is hypothetical data, and Consensys and I have not sold any shares.”

Although the recent turmoil has temporarily subsided, the market remains full of speculation regarding SharpLink’s movements. BTCS Inc CEO Charles Allen stated: “In my experience, given the backgrounds of some investors participating in the trading, they may indeed be quietly selling off. Moreover, ‘prefunded warrants’ are essentially an arrangement to evade position disclosure and avoid becoming a related party.”

He further pointed out that SharpLink immediately submitted a $1 billion ATM plan (stock issued at market price) after obtaining WKSI qualification on May 30. They may have quietly completed the financing through continuous trading without the need for immediate disclosure. If everything goes smoothly, there is a possibility of an announcement tomorrow regarding the $1 billion purchase of ETH, which could reignite market enthusiasm.

Is SBET currently at a 100% premium?

The current stock price performance and premium situation of SharpLink (SBET) also reveals investors’ complex expectations for its future trend. According to cutting-edge technology investor Zheng Di’s analysis, the current premium of SBET is approximately 100%.

According to SEC filings, the company’s total fully diluted share capital is 77, 526, 682 shares, which gives the company a total market capitalization of approximately $800 million combined with an after-hours share price of approximately $10. The number of shares registered this time is 75, 319, 345 shares (assuming that all the warrants of the advisor and the investment bank have been converted into shares), plus the original share capital of 690,000 shares, Zheng Di deduced that the previous ATM (shares issued at market price) worth US$1 billion actually only executed about 1, 517, 337 shares, indicating that the vast majority of the ATM quota may not have been used and there is still a risk of dilution in the future.

It indicates that the total amount of PIPE financing is 425 million USD. Considering that Consensys serves as the company’s Ethereum strategic advisor, and there are reports that Consensys-related addresses have purchased approximately 300 million USD worth of ETH, there is reason to believe that most, if not all, of the financing funds have been used to purchase ETH. Given the limited recent price fluctuations of ETH, the company’s existing ETH holdings should maintain a market value of around 400 million USD.

Therefore, considering the above factors, Zheng Di estimates that the current market premium of SBET is about 100%.

The premium of SBET reflects the market’s recognition of its asset value to some extent, particularly the potential value of its Ethereum reserves. However, an excessively high premium also brings market risks, and in the future, with the release of more ATM (At-The-Market) share issuance and potential equity dilution, stock price volatility may intensify.

The drama of SharpLink is still playing out. If, as analyzed by Zheng Di, there is still room for equity dilution in the future, it may bring volatility pressure in the short term; however, if, as Charles Allen mentioned, the news of purchasing $1 billion in ETH is disclosed in the near future, it could reignite market sentiment and drive up stock prices.

This kind of “opacity” combined with “possibility” makes SharpLink both controversial and full of imaginative potential. The real climax may still be ahead.