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SharpLink Gaming Soars on $1.5 Billion Repurchase Plan

After the betting affiliate turned Ethereum holder announced it will repurchase up to $1.5 billion of its common equity, shares of SharpLink Gaming (NASDAQ: SBET) jumped on Friday.

Co-CEO Joseph Chalom stated in a statement that it wouldn't be wise to issue new stock to finance cryptocurrency purchases during times when SharpLink shares trade at or below the net asset value of the company's sizable Ethereum stake, but that it might be a good time to buy back stock.

"In this scenario, the accretive course of action may be to repurchase our common stock,” he said in the press release. “This program provides us with the flexibility to act quickly and decisively if those conditions present themselves.”

A $1.5 billion repurchase program represents over half of SharpLinik's market capitalization, which is currently $3.05 billion. SharpLink shares are up more than 12% on volume in late trading, which is much more than the daily average following the announcement of the repurchase program.

Why Repurchasing SharpLink Is Important

SharpLink may retire some of the shares it uses to finance Ethereum purchases as a result of its massive repurchase scheme. The corporation used its stock to finance Ether acquisitions, which helped it become one of the largest corporate owners of the second-largest digital currency.

For instance, SharpLink revealed on Tuesday that during the week ending August 15, it raised $537 million, of which $390 million came from a direct equity offering to a select group of qualified investors. As a result, the company's Ether position increased to 740,760 and its Ether concentration to 3.87, virtually doubling in just two months.

Similar to Michael Saylor's Strategy (NASDAQ: MSTR), which is currently the biggest corporate Bitcoin owner in the world, SharpLink Gaming is using its securities to finance purchases of Ether. No matter why new shares are issued, existing investors are diluted. This explains why the announcement of the repurchase deal caused SharpLink to soar.

“The stock buyback program is designed to provide enhanced support to the market, optimize capital allocation and reinforce SharpLink’s long-term commitment to driving sustainable stockholder value,” according to the press release.

SharpLink at a Discount?

Businesses that have large treasury commitments in cryptocurrencies are frequently viewed as proxies for such digital assets. Because markets utilize the shares to price in the potential for future gains by the held cryptocurrency, those stocks frequently trade at premiums to the net asset values of those holdings.

In other words, stocks like SharpLink don't frequently trade at a discount to the held digital assets, but that is the case with SharpLink right now. Its Ether holdings are worth more than $3.5 billion, despite its market capitalization of $3.05 billion.

Furthermore, since the corporate treasury plan was revealed on June 2, the company's staking rewards have increased to around 1,400 Ether.