Author: Fairy, ChainCatcher
Editor: 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 an SEC document caused its stock price to plummet nearly 70% in after-hours trading.
The enthusiasm 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.
Market Misreading Behind the Plunge
At the end of May, SharpLink Gaming completed a $425 million public company private placement (PIPE), with investors including ConsenSys, Galaxy, and Pantera Capital, all veteran institutions heavily invested in Ethereum. The funds are used to acquire ETH as reserve assets. This operation caused SharpLink's stock price to soar to a high of $124, more than 40 times higher than before the financing news was announced.
Yesterday, SharpLink Gaming submitted an S-3ASR registration statement to the 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 shares at an opportune time.
For a time, the market misread this as "PIPE investors have started to apply for exit," and panic spread rapidly.
Market Misreading
SharpLink's after-hours stock price once fell to $8.75, a drop of up to 73%, before rebounding slightly to the $10 range.
Image source: yahoo!finance
Subsequently, SharpLink 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 'number of shares held after issuance' in the document is hypothetical data; Consensys and I have not sold any shares."
Although this storm 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 investors involved in the transaction, they may indeed be quietly selling off. Moreover, 'prefunded warrants' are essentially a way to evade disclosure of holdings and avoid becoming a related party."
He further pointed out that after SharpLink obtained WKSI qualification on May 30, it immediately submitted a $1 billion ATM plan (to issue shares at market price). They may have quietly completed financing through ongoing transactions without the need for immediate disclosure. If things go smoothly, an announcement could come tomorrow regarding a $1 billion purchase of ETH, reigniting market enthusiasm.
Is SBET currently at a 100% premium?
SharpLink (SBET)'s current stock price performance and premium situation also reveal investors' complex expectations about its future trends. According to cutting-edge technology investor Zheng Di's analysis, SBET's current premium is about 100%.
According to the documents submitted to the SEC, the company's fully diluted total share capital is 77,526,682 shares. Based on an after-hours stock price of approximately $10, the company's total market value is around $800 million. The number of shares registered in this offering is 75,319,345 shares (assuming that the advisors and investment banks' warrants have all been converted), plus the original share capital of 690,000 shares. Zheng Di deduces that the previously valued $1 billion ATM (to issue shares at market price) has actually only executed about 1,517,337 shares, indicating that most of the ATM's capacity may not have been utilized yet, and there remains a risk of dilution in the future.
It was stated that this PIPE financing totaled $425 million. Considering ConsenSys as the company's Ethereum strategic advisor, and reports that ConsenSys-related addresses have purchased about $300 million in ETH, there is reason to believe that most, if not all, of the financing funds have been used to acquire ETH. Given that ETH's recent price fluctuations have been limited, the market value of the company's current ETH holdings should remain around $400 million.
Therefore, considering the above factors, Zheng Di speculates that SBET's current market premium is approximately 100%.
The premium of SBET reflects, to some extent, the market's recognition of its asset value, especially the potential value of its Ethereum reserves. However, an excessively high premium also brings market risks; in the future, as more ATM (to issue shares at market price) capacity is released and potential equity dilution occurs, stock price volatility may intensify.
The dramatic play of SharpLink is still ongoing. If, as Zheng Di analyzed, there is still room for equity dilution in the future, it may bring volatility pressure in the short term; however, if Charles Allen is correct and news of a $1 billion ETH purchase is disclosed soon, it may reignite market sentiment and push the stock price higher.
This combination of "opacity" and "possibility" makes SharpLink both controversial and full of imaginative space. The real climax may still be ahead.
