Summary SharpLink Gaming is now trading at a significant discount to its Ethereum net asset value, creating a compelling entry point. SBET's ETH holdings generate yield through staking and more advanced DeFi strategies, enhancing returns beyond basic asset appreciation. Management is actively buying back shares and exploring DeFi opportunities, signaling confidence and strategic capital allocation to support shareholder value. Upgrading SBET from 'sell' to 'buy' due to its discounted valuation, productive ETH strategy, and potential for outperformance even if ETH trades sideways. Dare I say it, but the DAT craze of 2025 appears to have come back to reality. Maybe more than necessary, to be honest. When I initiated coverage of SharpLink Gaming ( SBET ) back in July, I called the stock a 'sell' based essentially entirely on the idea that buying SBET at 4x the value of the company's Ethereum ( ETH-USD ) holdings was a silly idea. This has turned out to be another good call : Data by YCharts With Ethereum up over 9% since my July SBET piece, if you picked SBET over ETH thinking one of these DATs was going to get the Strategy ( MSTR ) treatment from the market forever, it hasn't worked out for you. SBET shares have given back over 50% since that July 18th article. Which by itself is notable because even at that time the stock was already well off its high prices from May - which at one point went well over $100 per share. Valuation To Holdings Today we find a drastically different setup. One where, rather than trading at several multiples over its ETH assets, shares of SBET are currently trading at a fairly large discount to the ETH that the company holds. As of intraday October 31st, SBET shares are trading at a significant discount to mNAV. The company holds roughly 860k ETH, which gives SharpLink an ETH net asset valuation of $3.6 billion. This is well ahead of the $2.9 billion market capitalization of the company's shares. ETH Holdings & NAV (SharpLink) At an average paid price of $3,609 per ETH, the company has about a $240 million unrealized ETH gain and has generated over 6.1k ETH in staking rewards. The key difference between Ethereum or even Solana ( SOL-USD ), based DATs compared to the presumably more familiar Bitcoin ( BTC-USD ) DATs is that ETH and SOL can be productive assets beyond transaction payment tokens. For instance, ETH can be staked natively on chain or through a staking service to generate passive yields and help boost the security of the networks where they reside. This is a perfectly fine way to utilize PoS digital assets, but it doesn't necessarily make a DAT a better investment than a simple spot ETF that allows for staking . The latter of which is theoretically much safer and eliminates operational or dilution risk. But because of things like re-staking and DeFi lending, there are more complex ways to generate greater returns than basic staking yields, and SharpLink appears poised to do exactly that. Capital Allocation Strategy Back in early September , SharpLink began buying back shares and cited undervaluation as the primary reason for doing so. At that time, the company had bought back 939k shares at a price just under $16 per. At an intraday price on October 31st under $14 as of writing, these purchases don't look that great in hindsight. Yet, the ability to buy back its own stock when shares are at depressed levels on an mNAV basis are what separate ETH DATs from BTC DATs. If/ when MSTR begins to trade under an mNAV of 1 again , Strategy will have to either simply allow it, raise capital through debt or preferreds to buy back common, or sell Bitcoin to protect its equity valuation. Since the ETH that SharpLink has purchased is generating yield with very little overhead, management arguably has far better optionality in defending its share price than most BTC-based DATs do. SharpLink can realistically put a floor on its mNAV should it choose to do so. Since the company has reiterated that it won't tap the ATM to buy more ETH when SBET trades at an mNAV discount, dilution concerns should be fairly mitigated at current levels. More recently, SharpLink has expressed a willingness to go further out on the DeFi risk curve through ether.fi and EigenCloud . Through either.fi, SharpLink is essentially staking ETH for the passive network yield while also taking a more liquid derivative token of that ETH that can be utilized for lending or re-staking. Doing so adds a small amount of additional risk to the ETH holdings but it does allow the company to generate a small premium on the yield that it would generate from simply staking the ETH passively and leaving it locked. Rather than 3%, SharpLink could be looking at closer to 5% in a conservative re-staking strategy. At $200 million deployed capital, this is not a large amount of SharpLink's ETH hoard, as it's actually less than the company's unrealized gain from its ETH position. But it does allow management to show a competency in DeFi prowess and prove out the concept for shareholders before engaging with these types of networks to a larger degree. Closing Takeaways I actually kind of like SBET at this price. Even though I think Ethereum is arguably overpriced at 1,100x fees , the degree to which SharpLink can monetize that ETH beyond basic staking strategies is interesting. To be sure, more complex yield strategies introduce an additional element of risk to the company's operations. But I think those risks are necessary to make the company something worth investing in. Truthfully, it may no longer be fair of me to refer to SharpLink simply as an "Ethereum Wrapper." The fact of the matter is the company is starting to put its assets to work in a way that should benefit shareholder returns even in the event Ethereum somehow trades sideways for a considerable amount of time. I don't think sideways action is the most likely scenario for a variety of reasons. But if we're speculating on the prospects of new financial rails gaining wider adoption in global settlement, I believe Ethereum is a good network to wager on. And the companies that already hold substantial ETH and put that ETH to work could find themselves well positioned for the future. That we can now buy productive ETH at a discount to liquidation value is compelling. I'm upgrading SBET from 'sell' straight to 'buy.'
