TL;DR
- MegaETH bought back 4.75% of its equity and token warrants from pre-seed investors.
- The buyback was done to avoid secondary sales, as an investment fund closed its positions.
- The buyback valuation was higher than its $20 million seed round (a 9-figure valuation).
MegaETH bought back 4.75% of its stake from early investors. This is an unusual financial move from the Ethereum Layer 2 (L2) project, which aims to offer “real-time” transaction speeds.
Shuyao Kong, co-founder of MegaETH, explained that the repurchased stake includes both company capital (equity) and token warrants (rights to buy future tokens) that were in the hands of pre-seed investors.
This maneuver is atypical, as most crypto project buybacks occur after the token generation event (TGE) through open-market purchases.
The decision to conduct this MegaETH stake buyback was due to specific circumstances of its investors. Kong clarified that “we had investors that shut down their fund and tried to close all positions.” Since MegaETH does not allow secondary (private) sales, “the MegaETH team was the only available buyer.”
A Strategy of “Aligned Ownership”
The MegaETH co-founder framed the buyback as a strategic decision to consolidate its investor base ahead of the launch. “From day one, we’ve prioritized aligned-ownership and long-term builders over pass-through capital,” Kong stated.
The goal was to prevent those shares from circulating privately. “We’d rather take supply off the market… It keeps the cap table clean, the incentives tight, and the mission clear,” she added.
Although the exact terms of the deal (total size and financing) were not disclosed, the MegaETH stake buyback was completed during the summer with approval from key stakeholders like Dragonfly and Echo. Notably, the buyback was conducted at a valuation higher than its seed round, in which MegaETH raised $20 million at a “9-figure” valuation (at least $100 million).
The project has already conducted two community participation rounds: one for $10 million via Echo, “Cobie’s” angel-investor platform, and another $13 million through its “The Fluffle” NFT collection. MegaETH is in the final phase of its testnet and is preparing a public token sale on the Sonar platform, with the mainnet and TGE expected in the near future.
