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SharpLink Gaming, recognized as the first company to formalize Ethereum 
$2,466 as an official treasury asset, experienced a dramatic over 70% plunge in its stock during after-hours trading. The catalyst for this steep decline was the company’s submission of an S-3 registration statement to the U.S. Securities and Exchange Commission (SEC), granting the ability for sales of future securities. The registration involves the sale of approximately 59 million common shares, sparking dilution concerns in the market, which further fueled the stock’s downfall. Current data shows the shares still trade with around a 70% loss.
S-3 Filing Spurs Dilution Fears
The filing authorizes the sale of nearly 59 million common shares, including pre-funded warrants, strategic advisor warrants, placement agent warrants, and other shares from a private placement. This move permits existing investors, rather than the company itself, to sell these holdings. The possibility of such an expansive sale raised anxious expectations of flooding the market with around 58.7 million new shares, should all warrants be exercised. Market participants feared that this influx could devalue existing shares, leading to a sharp and intense selling pressure.
The anticipation of such an enormous potential stock release triggered a notable reaction from the investors, resulting in the rapid decline of the stock value. The fear of devaluation was the primary driver behind the sudden and forceful selling momentum.
Company Statement Fails to Quell Market Panic
Joseph Lubin, CEO of Consensys and Chairman of SharpLink, responded via social media emphasizing that the SEC’s filing had been misinterpreted. He stressed that the regulatory filing was not an indicator of imminent stock sale or dilution, but merely a procedure allowing current shareholders to sell their shares if they wished. Lubin clarified it was a routine regulatory step post a Private Investment in Public Equity (PIPE) transaction.
Furthermore, he assured that neither he nor the company had sold any shares. Despite these clarifications and efforts to restore confidence, market panic persisted, unable to curb the potential share offering expectation. The SBET shares maintain their substantial 70% loss at the time of reporting, reflecting the continued lack of full market confidence.
Previously, SharpLink had raised $425 million through a PIPE to establish Ethereum as its official treasury asset, with Lubin appointed as the company’s chairman following that transaction.
