How to eliminate negative premium
Michael Sonnenshein, CEO of US crypto asset (virtual currency) management company Grayscale, said in an interview with US CNBC on the 24th that if legal measures regarding the company’s bitcoin investment trust (GBTC) ETF conversion stalled, GBTC announced that it would consider a tender offer for its shares.
“With Grayscale Bitcoin Trust, people aren’t allowed to redeem…Is there a point where you are going to let investors start redeeming? Why don’t you lower your fees in the meanwhile?” @BeckyQuick asks @Grayscale CEO @Sonnenshein: pic.twitter.com/bUY95jjzHv
—Squawk Box (@SquawkCNBC) January 24, 2023
GBTC is an investment trust linked to the price of Bitcoin. It is listed on the U.S. unlisted stock market “OTC Market (OTCQX)”, and investors can trade BTC from their brokerage account without buying, selling or holding the actual product.
On the other hand, GBTC cannot be redeemed directly into BTC, and since February 2021, GBTC has been trading at a significant discount to the underlying Bitcoin price. Furthermore, due to the recent bear market, the negative premium has reached nearly -50% at one point, and investors are calling for redemption.
Relation:Bitcoin investment trust GBTC litigation issue, proposal to eliminate negative divergence
Grayscale submitted an application to the U.S. Securities and Exchange Commission (SEC) in October 2021 to convert GBTC to a physical ETF in order to eliminate the negative premium. The company sued the SEC after its conversion request was denied by the SEC in June.
Asked when it would consider redeeming investors, Sonnenshein said GBTC has been looking to convert to an exchange-traded fund (ETF) since its launch in 2013. He said he still sticks to that policy.
However, regarding GBTC’s ETF conversion, “if all judicial options are exhausted against the SEC, we will consider working constructively with regulators and shareholders to conduct a tender offer,” he said.
What is GBTC
A “Bitcoin investment trust” provided by Grayscale, a major US virtual currency investment company. GBTC is an investment trust linked to the price of Bitcoin and can be traded like ordinary stocks. It is offered to institutional investors and accredited investors recognized by the U.S. Securities and Exchange Commission (SEC), and has the advantage that investors do not have to buy, sell or hold actual Bitcoins.
In an interview, Sonnenshein did not elaborate on the potential takeover bid, but in a letter to investors last December, Sonnenshein said: It is referred to as “one”.
Grayscale envisions a tender offer within 20% of GBTC’s total outstanding shares. The following approvals from the SEC and shareholders are required for the tender offer to materialize.
- SEC: Relaxation of certain requirements applied to tender offers (to ensure a fair purchase for all investors)
- Shareholders: Amendment to GBTC Trust Deed
In an interview, Sonnenshein said a takeover bid “ultimately won’t do very well.” He said that the reason for this is that it will lead to regulators keeping bitcoin out of the regulatory framework, which will not protect investors.
Progress in SEC litigation
There have also been developments in litigation against the SEC. On the 23rd, the US Court of Appeals for the District of Columbia decided that the trial date for oral arguments would be March 7, earlier than Grayscale had expected.
We previously anticipated oral arguments to be as soon as Q2 2023, so having them scheduled to begin on March 7 is welcome news.
Learn more: https://t.co/76g80XWVjY $GBTC
— Grayscale (@Grayscale) January 24, 2023
Grayscale said it was welcome news as it had expected oral arguments to begin in the second quarter of this year. In an interview with US media Barron’s, Sonnenshein said he expects a court decision later this year.
He has repeatedly argued that getting SEC approval to convert GBTC into an ETF to extract billions of dollars in value is the most realistic path for shareholders.
“Crypto is here to stay. Regulators are not here to tell investors what to and what not to invest in. They’re here to ensure all the proper disclosures are made…so investors understand all the risks associated,” says @Grayscale @sonnenshein“That’s really the role of the SEC.” pic.twitter.com/k30y6DewBe
—Squawk Box (@SquawkCNBC) January 24, 2023
The SEC’s true role as a regulator is not to tell investors what to invest in, but to encourage appropriate disclosure so that investors can better understand the risks involved and make their own decisions.
In the lawsuit, the U.S. Digital Chamber of Commerce, major exchange Coinbase, and the New York Stock Exchange also supported Grayscale by submitting a legal advice (amicus brief) to the court, and the approval of ETF conversion was He seems to think it will lead to an ideal path for investors.
Relation:Grayscale Responds To SEC In Lawsuit Over Bitcoin ETF Conversion