SharpLink Gaming Shares Plummet 70% After SEC Filing Confusion

SharpLink Gaming’s shares dropped over 70% after the company filed an S-3 prospectus with the SEC, leading to confusion about potential share sales. In May, SharpLink announced it had raised $425 million to create an Ethereum treasury, boosting its stock price significantly. Joseph Lubin from Ethereum clarified the filing’s intentions, stating it was standard procedure and no shares were sold by him or Consensys.

Shares of SharpLink Gaming took a nosedive on Thursday, plummeting over 70% in after-hours trading following a confusing SEC filing. This online gambling marketing firm had previously announced plans to create an Ethereum treasury funded by a substantial $425 million PIPE offering in May. In nasdaq trading, the stock was hovering around $10.35, after dipping to less than $8 briefly.

The decline in shares followed the filing of an S-3 shelf prospectus with the SEC, which has sparked confusion regarding the status of shares sold by earlier investors. According to Yahoo Finance data, SharpLink’s stock had ended regular trading at $32.53 but has since faced a sharp downturn.

Joseph Lubin, Ethereum’s co-founder and chairman of SharpLink’s board, took to X to address the situation. He asserted that there is a misunderstanding regarding the S-3 filing, explaining that it merely registers potential resales by previous investors. “It’s standard post-PIPE procedure in traditional finance,” he said, clarifying that he nor Consensys have sold any shares.

The tumultuous share price echoes earlier excitement when SharpLink’s stock soared to nearly $80 shortly after announcing its PIPE offering. This strategic move aimed to set up an Ethereum treasury, which had a dramatic effect on its stock, pushing it up over 400% at that moment.

For context, a PIPE — or Private Investment in Public Equity — allows public companies like SharpLink to rapidly raise funds by selling shares to accredited investors. This method has garnered interest among a host of public firms looking to establish or enhance their crypto treasuries. Notably, this trend has been led in part by MicroStrategy, which pivoted to become a Bitcoin treasury holding a staggering 582,000 BTC valued at over $61 billion.

Interestingly, while many firms are choosing Bitcoin for their treasuries, others have started to explore alternative cryptocurrencies like Solana and XRP. As for Ethereum, it was trading at about $2,640, marking a decline of over 4% within the preceding 24 hours, according to CoinGecko’s data.

In a previous statement, SharpLink disclosed participation from well-known Ethereum-centric firms, including Consensys, Galaxy Digital, ParaFi Capital, Ondo, and Pantera Capital, in the PIPE offering. Together, these entities acquired over 69 million shares at a price of $6.15 each, further backing the creation of SharpLink’s Ethereum treasury.