- SharpLink investors may be cashing out.
- The firm’s shares plunged 75% after SEC filings were made public.
- The firm has adopted a Sayloresque Ethereum treasury strategy.
SharpLink Gaming, an online casino company that recently pivoted to pursuing an Ethereum treasury strategy, fell over 75% in after hours trading on Thursday after a financial filing showed early investors were potentially cashing out shares.
The firm submitted an S3 form to the Securities and Exchange Commission ahead of plans to issue and sell additional shares, intending to use the proceeds to buy more Ethereum.
The form showed all but three participants in the firm’s previous Private Investment in Public Equity round — or PIPE sale — had filed to give themselves the ability to unload all their equity.
Shares in the firm, which is listed on the Nasdaq exchange under the ticker SBET, traded at around $32.53 on Thursday afternoon. After the filing, they dropped to $8.11 — a 75% drawdown.
Shares have since recovered slightly and trade at $11.11 in Friday premarket trading.
It’s not clear if the early SharpLink investors sold their shares en masse. But the filing gave them the ability to do so.
“This creates a prisoner’s dilemma: everyone rushes to sell before the others do — a classic race to the bottom,” Charles Allen, CEO of BTCS, a publicly-traded firm that’s pursuing its own crypto reserve strategy, tweeted.
SharpLink Gaming did not immediately respond to a request for comment.
The Strategy strategy
On May 27, SharpLink announced a $425 million private share sale with the goal of using the proceeds to pursue an Ethereum treasury strategy. It’s one of the first firms to attempt such a strategy using Ethereum, the second largest cryptocurrency.
Crypto treasury companies have soared in popularity in recent months as Bitcoin soared to an all-time high above $111,000 driving a broad rally across the crypto market.
The idea was pioneered by Michael Saylor’s firm Strategy, which began accumulating Bitcoin in 2020.
Since then, over 200 other firms including Japanese hotel company Metaplanet and video games retailer GameStop have made accumulating Bitcoin a core part of their corporate strategies.
Not everyone’s delighted. This week, Coinbase, the US-based crypto exchange, warned that the “attack of the clones” could create systemic risks for the crypto market.
Misinterpretation
Conensys CEO Joseph Lubin, whose firm Consensys led SharpLink’s PIPE sale in May, blamed the share price collapse on investors misinterpreting the filing.
In an X post, Lubin said the shareholder information provided in the S3 form is hypothetical, and not an indication of actual sales.
“To clarify, neither Consensys nor I have sold any shares,” he said.
Yet so far, that’s done little to reassure investors.
Crypto market movers
- Bitcoin is down 2.3% over the past 24 hours to trade at $104,817.
- Ethereum fell 7.9% over the same period to $2,529
What we’re reading
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at [email protected].
