TLDR
- Sharplink Gaming initiated a $1.5 billion share buyback plan as its stock trades below Net Asset Value (NAV)
- The company has already repurchased 939,000 common shares at an average price of $15.98
- Sharplink holds 837,230 Ether worth approximately $3.59 billion and stakes nearly 100% of it
- Stock closed at $16.69 on Wednesday, up 6.59%, but is down 25.29% over the past 30 days
- NYDIG analyst advised crypto treasury companies to consider buybacks when shares fall below NAV
Sharplink Gaming, the second-largest Ether treasury company, has begun a $1.5 billion share buyback program to boost its stock price, which currently trades below its net asset value (NAV). The company started the program by repurchasing 939,000 common shares at an average price of $15.98.
“We believe the market currently undervalues our business,” said Sharplink co-CEO Joseph Chalom. “Rather than issue equity while trading below NAV, we are focused on disciplined capital allocation – including share repurchases – to increase stockholder value.”
The buyback decision comes as Sharplink’s stock has struggled in recent weeks. While shares closed at $16.69 on Wednesday, up 6.59% for the day, the stock has dropped 25.29% over the past month.
The company stated that it believes its shares are “undervalued,” with the buybacks representing a “compelling investment that underscores confidence in its long-term strategy.” By buying back shares priced below its NAV, Sharplink aims to increase the NAV per share and boost its stock price.
Substantial Ethereum Holdings
Sharplink currently holds 837,230 Ether, valued at approximately $3.59 billion at the time of publication, according to data from StrategicETHReserve. This makes it the second-largest Ether treasury company in the market.
The company reported that nearly 100% of its ETH holdings are staked to earn rewards from the blockchain. This staking strategy “is generating material revenue for the Company,” according to their statement.
The buyback program was authorized on August 22, with Chalom stating at the time that it would allow the firm to act quickly if market conditions presented opportunities. This approach aligns with recent expert recommendations.
Expert Recommendations on Buybacks
The buyback strategy comes just days after Greg Cipolaro, global head of research at NYDIG, advised that crypto treasury companies should consider buybacks when their shares fall below NAV.
“If we were to give one piece of advice to DATs (digital asset treasury companies), it’s to save some of the funds raised aside to support shares via buybacks,” Cipolaro said on Friday.
He added that if shares in these companies trade below NAV, “the most straightforward course of action would be stock buybacks.”
This recommendation appears timely as industry analysts monitor the performance of crypto treasury firms. In June, venture firm Breed warned that only a few Bitcoin treasury companies would stand the test of time.
Breed cautioned that many BTC holding companies trading close to NAV might face a “death spiral” in the future. This warning highlights the challenges faced by companies like Sharplink that hold large amounts of cryptocurrency as part of their treasury strategy.
Sharplink’s stock price showed positive movement following the buyback announcement. Shares in Sharplink Gaming (SBET) increased 6.51% across the trading day on Tuesday, according to Google Finance.
The company’s decisive action to repurchase shares comes as several crypto treasury companies face similar challenges with their stock valuations relative to their crypto holdings.
Sharplink said on Tuesday that while the company “trades below its Net Asset Value, stock repurchases are immediately accretive to stockholders.” This suggests the company sees the current market conditions as an opportunity to strengthen its position.
