Sharplink, the second-largest Ether (ETH) treasury company, has started a $1.5 billion share buyback plan in an effort to boost its stock, which is trading below its net asset value.
SharpLink said on Tuesday that while the company “trades below its Net Asset Value (“NAV”), stock repurchases are immediately accretive to stockholders.”
“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
It comes just days after an analyst at NYDIG said crypto treasury companies should consider buybacks when their shares fall below their NAV, warning that many crypto buying companies’ premiums are narrowing.
Sharplink stock surges in Tuesday trading
SharpLink initiated its buyback program with the repurchase of 939,000 common shares at an average price of $15.98. SharpLink buying back its shares priced below its NAV — the value of its crypto holdings — aims to increase the NAV per share and boost its stock price.
Shares in Sharplink Gaming (SBET) closed trading on Wednesday at $16.69, up 6.59%, according to Google Finance.
Sharplink Gaming’s stock price increased 6.51% across the trading day on Tuesday. Source: Google Finance
However, the stock price is down 25.29% over the past 30 days, with Sharplink adding it believes its shares are “significantly undervalued,” with the buybacks representing a “compelling investment that underscores confidence in its long-term strategy.”
Sharplink holds 837,230 Ether, worth approximately $3.59 billion at the time of publication, according to StrategicETHReserve data.
Sharplink said that nearly 100% of its ETH holdings are staked to earn rewards from the blockchain, “which is generating material revenue for the Company.”
Treasury firms should have funds aside for buybacks: NYDIG
The firm authorized the buyback program on Aug. 22. Chalom said at the time that the program allows the firm to act quickly and decisively if those conditions present themselves.
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On Friday, NYDIG global head of research Greg Cipolaro said that if shares in so-called digital asset treasury (DAT) company trade below NAV, “the most straightforward course of action would be stock buybacks.”
“If we were to give one piece of advice to DATs, it’s to save some of the funds raised aside to support shares via buybacks,” he said.
Just months earlier, in June, venture firm Breed said only a few Bitcoin (BTC) treasury companies will stand the test of time and avoid the vicious “death spiral” that will impact BTC holding companies that trade close to NAV.
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