A Boring Value Bet: $115K in SBET (SharpLink Gaming Inc) (26% Discoutn on NAV)
Since I am already invested in Ethereum with Grayscale Ethereum Mini Trust ETF (ETH), I swapped some of that into SBET, to me this is a bet on mean reversion, does not add any Ethereum beta, for me.
# The opportunity
https://preview.redd.it/qyve9dxk7lag1.png?width=1567&format=png&auto=webp&s=871b9e3ab02e17f9aee7b6189d4fee2be2ced9ae
The stock is trading at around \~26% discount against it's NAV, I'm not using the enterprise value because the company literally just hold and stake Ethereum.
This mean there is a 36.3% potential upside to Ethereum.
The staking also yield about \~3% per year, which makes time in our favor.
Personally I think the discount is unjustified and are overreaction of the recent market crash of Ethereum from it's peak in Oct to now at $2970.
# What do SBET do
SBET is basically an eth treasury company, in plain words, it's a kind of company that harvest the premium mNAV by doing ATM sales to buy more eth and increase the eth per share, or do buy back when there's a discount on mNAV. Both are accretive.
Just like other crypto treasury company like MSTR, BMNR, BTBT, etc. They all use a mixed of PIPE, ATM, convertibles to raise fund and keep accumulating crypto.
# The Risk
The risk is obvious, if they do ATM sales when the stock is at discount to NAV, it will be dilutive which means eth per shares goes down, nav goes down, and the discount can continue to widen.
Just [like this ETHZ](https://x.com/ETHZilla_ETHZ/status/2003096385021759668) use atm selling to raise fund to pay their convertibles, and "betray" their investors by claiming they will no longer focus on building eth per share but to pivot to something else.
The discount gap may widen further or stay unclosed for a long time.
It also inherit all the market risks from Ethereum itself, obviously.
# The Good Part
The company has no convertibles, no long term or current debt, (as per their [latest 10-q](https://www.sec.gov/ix?doc=/Archives/edgar/data/1981535/000149315225021970/form10-q.htm#H_002)), and they also made a post on twitter stating they has never done atm sales when nav is at a discount:
[https://x.com/SharpLink/status/1965385468360741042](https://x.com/SharpLink/status/1965385468360741042)
While it's not legally binding it's an important and serious statement, violating that kind of statement would be faced with lawsuits from angry shareholders, burn their reputation and limit their future ability to raise money.
# I placed a $115K bet on this
https://preview.redd.it/f48c4rnxalag1.png?width=1260&format=png&auto=webp&s=43a54a5d9ee93aac35193d245bb00370a1124dfd
But let's be honest the potential upside from this bet probably won't be exciting enough for most people in WSB, it's not even a 100% potential lol.
However if you're also betting on Ethereum than this is a different story. Now if you doesn't want to bet on Ethereum, you can probably use futures to cancel out the Ethereum beta, the staking yield should cover the fees for you.