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Friday, December 9, 2022

Has SharpLink (SBET) Stock Risen Extended Session For A Reason?

Since the firm recently signed a deal to sell its legacy telecoms business, SharpLink Gaming Ltd. (NASDAQ: SBET) has increased 5.00% to $0.693 in after-hours trading hours on Friday.

Whom is SBET selling the business to?

This month, Entrypoint South Ltd. (“Entrypoint”), an Israeli company and a division of Entrypoint Systems 2004, Ltd., inked a share and asset purchase agreement with the company, according to a statement from SharpLink (SBET). Under the terms of the arrangement, SharpLink would buy its former Mer Telecommunications Systems unit (“Legacy MTS”) for an earn-out period of one year, subject to the usual closing requirements and requisite regulatory clearance from the Israel Innovation Authority.


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Entrypoint will pay SBET an earn-out payment that is equal to three times Legacy MTS’ Earnings Before Interest, Taxes, and Depreciation (“EBITDA”) for the year ending December 31, 2023, up to a maximum earn-out payment of $1 million. This is in exchange for Entrypoint acquiring all rights, title, interests, and benefits to Legacy MTS, including 100% of the shares of MTS Integratrak Inc., one of the Company’s US subsidiaries (adjusted to reflect net working capital as of the closing date).

The core of Legacy MTS’s business is the global offering of telecom expense management (“TEM”) solutions that help businesses and organizations make wiser decisions about their telecoms expenditures at every step of the service lifecycle, including cost allocation, proactive budget control, fraud detection, processing transactions, and budget projection. In a go-public deal in July 2021, SharpLink combined with Mer Telemanagement Solutions Ltd., which at the time was the owner of the Legacy MTS company.

After the merger, Legacy MTS and its associated businesses were managed by SharpLink as a business unit, which was referred to in financial documents as its Enterprise TEM segment. Due to the fact that Legacy MTS’s operations are neither complementary nor strategically advantageous to SharpLink’s focus on the developing U.S. sports betting and iGaming industries, the board of directors of SharpLink gave management permission to begin talks with potential Legacy MTS buyers in June 2022.

How will the agreement support SBET’s future growth?

SBET will be able to concentrate its time, attention, and resources only on developing and enhancing its core competencies once it finds a buyer who is in the same industry as Legacy MTS and who can derive value from the Legacy MTS company going ahead. As a result, SBET will put a greater emphasis on developing cutting-edge technology for sports betting conversion, sports game creation services, as well as other user engagement strategies.

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