SharpLink shares tumble 70% after $425M raise for Ethereum treasury strategy

Nasdaq-listed ETH treasury company SharpLink Gaming saw its shares drop over 70% during Thursday's after-hours trading session after it registered a statement allowing the resale of millions of its common shares.

According to data from Google Finance, SharpLink shares, SBET, fell 12.25% on Thursday to $32.5, then plummeted over 75% to a low of $8 at one point after markets closed. It has since recovered to $11.15.

SharpLink, a sports betting platform, came into the limelight earlier this month when MetaMask developer Consensys led its $425 million private investment to build a corporate treasury based on Ethereum.

The firm's sharp drop occurred after the company filed its S-3 registration statement with the Securities and Exchange Commission, which notifies a potential resale of nearly 58.7 million common shares issued to over 100 investors in a private investment in public equity (PIPE) offering. 

The filing appears to have prompted a sell-off in the stock from anticipation of a major resale, creating a "prisoner's dilemma" dynamic, according to BTCS CEO Charles Allen .

After SharpLink's stocks plunged, Consensys CEO and SharpLink Chairman Joseph Lubin explained that traders appear to have misinterpreted the filing.

"It registers shares for potential resale by prior investors — the 'Shares Owned After the Offering' column is hypothetical, assuming full sale of registered shares," Lubin wrote on X. "This is standard post-PIPE procedure in TradFi, not an indication of actual sales." 

Lubin made clear in his X post that neither Consensys nor he sold any shares of SharpLink. 

Consensys' General Counsel Matt Corva also said Thursday's S-3 was not a unique filing, saying the market sell-off was just a "bunch of FUD" by those who do not understand the process or want to mislead others.

"It would be the same as just recognizing that tokens have been minted as part of a smart contract, but it's TradFi tech," Corva said. "The filing doesn't reflect anyone's sales, which may or may not ever happen, I have no idea. But it's a basic filing. Like saying the sky is blue, but now it's officially blue."

At the end of last month, SharpLink announced plans to raise up to $1 billion from common share offerings, with proceeds earmarked for purchasing ETH. 

BTCS CEO Allen suggested a possibility that SharpLink already secured the funds to reveal a $1 billion ether purchase tomorrow — effectively countering the stock's latest losses.

"If they played cards right, [they] would expect a surprise PR tomorrow with $1b of ETH purchases," Allen wrote. "Which could light the match to reignite the stock."