SEC documents trigger a 70% big dump, what does the future hold for "ETH Treasury Stock" SharpLink?

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 filing caused its stock price to plummet nearly 70% in after-hours trading.

Hotly pursued turns into doubt, faith diving for panic. This article will dissect this sudden "trust crisis" and discuss the hidden picture behind it.

Misinterpretation 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 institutions such as ConsenSys, Galaxy, and Pantera Capital. The funds will be used to acquire ETH as a reserve asset. This move caused SharpLink's stock price to soar to a peak of $124, more than a 40-fold increase 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 misinterpreted it as "PIPE investors have started to apply for liquidation," and panic quickly spread.

Market Misreading

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

Source of the image: yahoo!finance

Subsequently, SharpLink's board chairman and Consensys CEO Joseph Lubin spoke out to clarify: this document is just a routine registration process after 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 neither Consensys nor I have sold any shares."

Although the 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 involved in the trading, they may indeed be quietly selling off. In addition, 'prefunded warrants' are essentially a mechanism to avoid disclosure of holdings and to avoid becoming related parties."

He further pointed out that SharpLink submitted a $1 billion ATM program (at-the-market stock issuance) immediately 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, an announcement of a $1 billion purchase of ETH could be made tomorrow, reigniting 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 trends. According to frontier technology investor Zheng Di's analysis, the current premium of SBET is approximately 100%.

According to the documents submitted to the SEC, the company's fully diluted total shares outstanding is 77,526,682 shares. Based on an after-hours stock price of about $10, the company's total market capitalization is approximately $800 million. The number of shares registered in this offering is 75,319,345 shares (assuming that all warrants held by advisors and investment banks have been fully converted), plus the original capital of 690,000 shares. Zheng Di infers from this that the previously valued $1 billion ATM (at-the-market issuance of stock) has actually only executed about 1,517,337 shares, indicating that a large portion of the ATM capacity may still be unused, and there remains a dilution risk in the future.

This indicates that the total amount of PIPE financing is $425 million. Considering that Consensys serves as the company's Ethereum strategic advisor, and there are reports that Consensys-related addresses have purchased approximately $300 million in ETH, it is reasonable 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.

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

The premium of SBET reflects the market's recognition of its asset value to some extent, especially 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 offerings) quotas and potential dilution of equity, stock price volatility may intensify.

The grand drama of SharpLink is still playing out. If, as analyzed by Zheng Di, there is still space 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 worth of ETH is disclosed soon, it could reignite market sentiment and drive up stock prices.

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