• Grayscale CEO Michael Sonnenshein has proposed a tender offer of 20% of the $10.7 billion Grayscale Bitcoin Trust if it fails to convert into an exchange-traded fund (ETF).
• The Grayscale Bitcoin Trust’s value has fallen to a record low, prompting investors to consider their options.
• Grayscale recently sued the Securities and Exchange Commission (SEC) claiming that the SEC is failing to apply consistent treatment to similar investment vehicles.
Grayscale Bitcoin Trust, the world’s biggest digital-asset fund, has been facing a decline in value and a widening discount, prompting investors to consider their options. In a bid to ease the fears of investors, Grayscale CEO Michael Sonnenshein proposed a tender offer of 20% of the $10.7 billion trust.
A tender offer is an appeal to shareholders to offload their shares at a specific time, effectively returning the value invested back to them. Grayscale’s Bitcoin Trust was originally planned to trade like a bitcoin proxy as it sought ETF status, involving a net asset value (NAV) discount or premium. The premium or discount describes the difference in value between shares of the trust and the value of the underlying bitcoin held. When the value of the shares of the trust are higher than the underlying bitcoin, it is considered a premium. When the value of the shares drop below the underlying bitcoin, it is considered a discount.
Grayscale has been attempting to acquire ETF status for a while, and most recently after being denied, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC). In the lawsuit, Donald B. Verrilli Jr., Grayscale’s senior legal strategist and former U.S. solicitor general, stated that “As Grayscale and the team at Davis Polk & Wardwell have outlined, the SEC is failing to apply consistent treatment to similar investment vehicles, and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”
Despite the SEC’s repeated denial of a spot ETF, it has approved multiple futures ETFs, starting with the VanEck Bitcoin Trust in December 2020. Grayscale has been actively seeking to convert its trust into an ETF, but the SEC has been reluctant to approve the request. In light of this, the tender offer could be a viable option for investors to recoup some of their losses.
Grayscale has been one of the most successful asset managers in the digital asset space, and its investors have been able to benefit from their expertise. However, the trust has recently been facing a decline in value, prompting investors to consider their options. The tender offer proposed by Grayscale CEO Michael Sonnenshein could be one of the best solutions for investors to recoup some of their losses. It remains to be seen whether the SEC will give its approval for the trust to be converted into an ETF, but the tender offer could be a viable option for investors to consider.