With a big dump of 70%, can SharpLink still be a representative of "Ethereum concept stocks"?

Author: Fairy, ChainCatcher

Editor: TB, ChainCatcher

Original Title: SEC Documents Trigger 70% Plunge, What is the Future of "ETH Treasury Stock" SharpLink?

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

The fervor has turned into doubt, and faith has plummeted into panic. This article will dissect the sudden "crisis of trust" and discuss the underlying picture hidden behind it.

Misreading of the Market Behind the Plunge

At the end of May, SharpLink Gaming completed a $425 million private investment in public equity (PIPE), with investors including established Ethereum-focused firms such as ConsenSys, Galaxy, and Pantera Capital. The funds are used to acquire ETH as reserve assets. This operation led SharpLink's stock price to soar to a maximum of $124, increasing more than 40 times compared to before the financing announcement.

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

For a moment, the market misread it as "PIPE investors have started to apply to offload their shares," 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 PIPE, intended to "pre-register shares for potential resale," and does not represent any actual sales. He emphasized: "The 'post-issuance shareholding number' in the document is hypothetical data, and neither Consensys nor I have sold any shares."

Although the recent turmoil has temporarily subsided, the market remains full of speculation about SharpLink's movements. BTCS Inc CEO Charles Allen stated: "In my experience, given the backgrounds of some participants in the trading investment, 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 submitted a $1 billion ATM plan (issuance of stock at market price) immediately after obtaining WKSI status on May 30. They may have quietly completed financing through ongoing trading without the need for immediate disclosure. If things go smoothly, there could be an announcement tomorrow about spending $1 billion to purchase ETH, which would reignite market enthusiasm.

SBET currently has a premium of 100%?

SharpLink (SBET) current stock price performance and premium situation also reveal investors' complex expectations for its future trend. According to analysis by frontier technology investor Zheng Di, the current premium of SBET is approximately 100%.

According to the documents submitted to the SEC, the company's total fully diluted share capital is 77,526,682 shares. Based on an after-hours stock price of approximately $10, the company's total market value is about $800 million. The number of shares registered this time is 75,319,345 shares (assuming that the warrants of advisors and investment banks have all been converted into shares), plus the original share capital of 690,000 shares. Zheng Di inferred that the previously valued $1 billion ATM (At-the-Market offering) has actually only executed about 1,517,337 shares, indicating that a significant portion of the ATM limit may not have been utilized yet, and there remains a dilution risk in the future.

It is stated that the total amount of PIPE financing this time is 425 million USD. Considering that Consensys serves as the company's Ethereum strategic advisor, and there are reports that addresses related to Consensys have purchased about 300 million USD worth of ETH, it is reasonable to believe that most, if not all, of the financing funds have been used to buy ETH. Given the limited recent price fluctuations of ETH, the market value of the company's existing ETH holdings should remain at around 400 million USD.

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

The premium of SBET reflects the market's recognition of its asset value to a certain extent, especially the potential value of its Ethereum reserves. However, a premium that is too high also brings market risks; in the future, as more ATM (at-the-market issuance of stocks) quotas are released and potential equity dilution occurs, stock price fluctuations may intensify.

The grand drama of SharpLink is still ongoing. 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 stated, the news of purchasing $1 billion in ETH is disclosed soon, it may reignite market sentiment and push up stock prices.

The combination of this "opacity" and "possibility" makes SharpLink both controversial and full of imaginative space. The real climax may still be ahead.