SharpLink Sold Stock 42% Above Market Price as Fidelity Rebuilt Its Stake

SharpLink agreed on 22 Jun to sell 10,013,351 shares at $7.49 each, according to a prospectus supplement filed with the US Securities and Exchange Commission (SEC). Its shares had last closed at $5.29 four days earlier and had not traded at $7.49 since mid-May.

The deal was one sign that some institutional investors were valuing SharpLink differently from the public market. Investment manager Fidelity provided another. After cutting its stake by almost half during the first six months of the year, the firm roughly tripled its holding in July to 27.6mn shares, or 13.3% of the company.

Those moves came as SharpLink reported a $394mn quarterly loss and its shares traded at roughly a 28% discount to the market value of its Ether holdings. Neither the identity of the June buyer nor Fidelity's rapid rebuilding of its position appeared in SharpLink's results release on 10 Aug. The details emerge from SEC filings made in the surrounding weeks.

One buyer, a premium and a threshold

The shares sale netted $75mn gross and $73mn net proceeds, and came with an equal number of warrants exercisable at $8.15 for four years - 54% above the reference price. Full exercise would bring in a further $82mn. SharpLink closed at $4.97 on 23 Jun, the day the deal completed, meaning the buyer paid a 51% premium compared to that session. 

The Form 8-K the company filed the same day describes the buyer only as an institutional investor and names nobody. It is not required to. The 10,013,351 shares represent 4.7% of the 212,395,370 outstanding immediately after the offering, below the 5% level that triggers a Schedule 13G disclosure. 

The warrants are structured to preserve that anonymity. Under the prospectus supplement, the holder and its affiliates cannot exercise warrants if doing so would take their ownership above 4.99%. That ceiling can be raised to 9.99%, but only after 61 days' written notice. In practice, the buyer can exercise warrants while keeping its disclosed ownership below the 5% threshold that would require it to publicly identify itself as a major shareholder.

In the same quarter, SharpLink repurchased about 2.1mn of its own shares at an average price of $4.70, taking cumulative buybacks to 4,071,223 shares for $42mn, according to the release. The combination meant the company raised capital by selling new shares at $7.49 while buying back stock at an average price of $4.70, allowing it to raise more cash per share issued while partially offsetting the resulting dilution.

The market's response to the quarter itself came later. SBET closed at $6.18 on 10 Aug, the day the results were published, down 3.9% from its previous closing at $6.43, on TradingView data. The stock is declining more than 37% year to date. 

Fidelity halved out, then tripled back in

FMR LLC, Fidelity's parent company, has made three Schedule 13G filings on SharpLink since February, and the sequence shows a sharp reversal in its position. FMR held 17.7mn SharpLink shares, or 9% of the company, at 31 Dec 2025. Six months later, by 30 Jun, that had fallen to 9.35mn shares, or 4.5%, meaning Fidelity had cut its holding by nearly half over the first six months of the year.

Then it reversed course. By 31 Jul, FMR's position had jumped to 27.6mn shares, or 13.3% of the company. That means Fidelity added roughly 18.2mn shares in July alone, almost tripling its stake in a single month.

Fidelity Tactical High Income Fund held 18.1mn SharpLink shares, or 8.8% of the company, at 31 Jul. The Canadian-domiciled fund can invest across common and preferred shares, convertibles and fixed income, so the position fits within its mandate. More notable is the timing: Fidelity increased its exposure sharply during a period in which SharpLink generated just $24mn of revenue and posted a $1.1bn loss over the first six months of the year.

Asset manager BlackRock also reported 14mn shares of SharpLink as of 30 Jun, or 6.6%, after the company SharpLink joined the Russell 2000 and Russell 3000 in the June index reconstitution, meaning some of the stake is likely tied to index-tracking funds rather than an active investment view on the company.

Joseph Lubin, SharpLink's chairman, co-founder of Ethereum and CEO of ConsenSys, last reported 7.8% in a Schedule 13D amendment filed on 16 Apr.

The impairment trap

What these buyers are acquiring is exposure to a balance sheet that treats the same asset two ways.

SharpLink held 632,784 ETH at a fair value of $989mn, according to its quarterly report filed on 7 Aug. Changes in the value of those holdings flow through earnings, meaning losses can reverse if the price of Ether recovers.

A further 254,097 Ether-equivalents were held in LsETH and weETH, liquid staking tokens representing staked ETH. Those assets were carried at $369mn under cost-less-impairment accounting for indefinite-lived intangible assets. Unlike SharpLink's Ether holdings carried at fair value, subsequent increases in the value of LsETH and weETH are not reflected in their carrying value. Any recovery is recognized only when the tokens are redeemed or sold.

SharpLink states the consequence plainly in its results release: impairments on those holdings "are not reversed for subsequent market recoveries."

Over six months, the company booked $828mn of unrealized loss on the fair-value bucket and $268mn of impairment on the cost bucket. Ether traded at around $1,870 at 15:20UTC on 11 Aug, about 20% above the roughly $1,563 per coin implied by the company's own carrying value at the end of June, according to Sandmark calculations based on its balance sheet.

Assuming the position was unchanged, about $195mn of the unrealized loss on SharpLink's ETH holdings would have reversed this quarter as its recovered. The $268mn impairment on LsETH and weETH would not. At current prices, those 254,097 Ether-equivalents were worth about $475mn but would remain carried at $369mn.

That accounting asymmetry matters because LsETH and weETH are how SharpLink puts part of its ETH treasury to work through staking. Moving ETH into liquid staking tokens may generate yield, but it also moves those assets from fair-value accounting, where market recoveries flow back through earnings, into an accounting treatment where prior impairments are not reversed. Other ETH treasury companies using liquid staking strategies can face the same trade-off.

The cost of yield

SharpLink generated $11.2mn of staking revenue in the quarter, compared with $9.1mn of selling, general and administrative expenses, according to the results release. In other words, roughly 81% of the income generated from staking was offset by the company's operating costs. Across the first half, the ratio was about 80%, based on Sandmark calculations.

Against a crypto portfolio of about $1.4bn, the remaining operating spread works out to roughly 0.6% on an annualized basis before other gains, losses or expenses.

That helps frame the question Citizens JMP analyst Devin Ryan put to CEO Joseph Chalom on the earnings call: why should an investor own SharpLink rather than simply hold spot ETH or an exchange-traded fund?

Chalom pointed to advantages including permanent capital, access to deal flow and investment strategies that funds offering daily liquidity may be unable to pursue. The financials show how much those additional strategies need to contribute: staking income alone currently leaves only a narrow margin after corporate expenses.

Strategies still on hold

Two of the projects the company leads with have produced nothing so far.

The Galaxy SharpLink Onchain Yield Fund has $125mn committed, representing $100mn of SharpLink's ETH and $25mn from Galaxy Digital - with Galaxy as investment manager. However, nothing has been deployed. Chalom told analysts the fund will borrow against the contributed ETH to fund positions, adding leverage to a treasury that already carries full price exposure.

SharpLink has also provided anchor funding to EthLabs, Ethereum Institutional and EthSystems - three organizations founded by former Ethereum Foundation teams. The amount has not been disclosed in either the release or the quarterly report. Asked on the same call by B. Riley Securities analyst Fedor Shevelin what shareholders receive, Chalom said the organizations give SharpLink "no unique capability, profit sharing." Lubin, who funds the same three companies personally, called the outlay small in monetary terms without quantifying it. Chalom sits on the board of Ethereum Institutional.

The gap between the share price and the assets behind it has narrowed since the quarter closed. SharpLink ended June at $4.80, about 0.72 times the market value of its ETH on Sandmark calculations from its holdings, cash and share count. By 10 Aug closing, the stock had risen 29% from that level, against a roughly 20% rise in ETH price over the same stretch. The discount has closed a little, but it's not gone.

Sandmark put questions to SharpLink on the identity of the June purchaser, the size of its ecosystem funding commitments and its expectations for further impairments, as well as to Fidelity on the size of its position. The article will be updated when a response is received.