Ethereum treasury company Sharplink got a muted response from investors when it told Decrypt last week that it’ll stake a portion of the $3.6 billion worth of ETH in its treasury on Linea once mainnet goes live.
The company’s shares, which trade on the Nasdaq under the SBET ticker, are currently trading for $15.73, or 11% less compared to five trading days ago.
And now, it’s been the case for a week that users on Myriad, a prediction market owned by Decrypt parent company DASTAN, are doubting that Sharplink will scoop up enough Ethereum to hold 1 million ETH before Sept. 16. The company currently has 837,230 ETH in its treasury, worth approximately $3.62 billion at current prices.
At the start of the month, odds flipped to 70% of users saying Sharplink, which trades as SBET, will not make it to 1 million ETH before Sept. 16. And now the pessimism is growing, with 82.5% of users doubting the company is going to hit that milestone soon.
The sagging share price and growing doubts about the pace of its ETH acquisition likely has to do with Sharplink aggressively issuing shares and diluting existing investors, Samantha Bohbot, chief growth officer at RockawayX, told Decrypt.
Sharplink has been raising money to buy ETH through equity financing, which requires it to issue new SBET shares. But each new issuance dilutes the value of the stock held by existing shareholders. The prospect that Sharplink will do that again in a way that dilutes value could be making its stock unattractive to investors, Bohbot explained.
She added that digital asset treasury, or DAT, investors don’t yet seem to be interested in the prospect of holdings being used to generate yield.
“Currently, most DAT ‘investors’ should be thought of more as technical traders than long-term business backers,” Bohbot said. “They are trading around the premiums of listed DAT shares versus their underlying crypto holdings, or speculating that share prices spike alongside broader crypto rallies. Few appear focused yet on whether a DAT’s premium valuation is justified by its ability to generate yield above simply holding the asset.”
That doesn’t mean she thinks Sharplink’s plans are a bad idea. But they’re a long-term play that most investors don’t place a high value on at the moment.
“We expect that to change; over time, the market is likely to differentiate DATs that successfully deliver attractive, sustainable yield on their crypto treasuries,” Bohbot said, “while those that fail to generate returns will likely trade at a discount to assets, as often befalls public holding companies.”
It’s also worth noting that Sharplink already stakes a percentage of its ETH holdings on the Ethereum mainnet, so far earning 2,318 ETH (or $10 million worth at today’s prices) in rewards since June. So moving ETH over to Consensys’s Ethereum layer-2 network Linea is likely a bigger deal for Linea stakeholders than it is for SBET investors.
There’s other factors to consider too, said James Harris, CEO of institutional digital asset firm Tesseract.
“Linea is still new and untested at scale, so investors may be wary of smart contract or operational risks that don’t exist with more established custodial staking providers, though Consensys’ involvement should help mitigate this concern” he told Decrypt. (Disclosure: Consensys is one of 22 investors in an editorially independent Decrypt.)
Leading Ethereum development company Consensys has been central to Sharplink’s ETH treasury since it was first announced in May. The company led a $425 million private investment in public equity, or PIPE, round in May. As part of the deal, Consensys CEO and Ethereum co-founder Joseph Lubin became chairman of SBET’s board and Sharplink joined the Linea Consortium.
So it’s likely that Ethereum investors have been expecting Sharplink to stake on Linea for months, but as Harris pointed out, “yield terms and liquidity mechanics haven’t been fully disclosed yet, making it harder for institutions to assess risk-reward.”
