Crypto asset and investment management company Grayscale has announced that it will split its Ethereum shares in mid-December
For each Ethereum share held, there will be eight more shares after the split. The stock split of its Ethereum Trust Fund (ETHE) will begin on December 17. The cryptocurrency investment company currently has 29.5 million Ethereum shares in circulation. After the split, the number of shares in Grayscale’s Ethereum Trust Fund will increase to 265.5 million.
The company hopes to improve the commercialization of these shares with the division decision, that is, making them more accessible. As it stands, an ETHE share is equivalent to 0.09284789 Ethereum tokens. This number will be reduced to 0.01031643 if the next division is successful.
In other words, the value of a single share will decrease in proportion to the split. However, shareholders will retain their overall total value. The split will cause the stock price to drop from $ 100 to around $ 11.12.
By the same calculation, an individual with five units now has custody of 45 units. At the time of this writing, ETHE’s shares were trading at $ 108.8 – up 350% since the beginning of the year. The shares have attracted a lot of interest, mainly from retail investors.
The exercise is neither new nor strange in the world of stocks. In the past, several companies have completed capitalization issues (scrip) – an exercise in which a company creates new shares that are then distributed to existing shareholders at no cost.
This process does not affect the value of the total asset under management in any way. Instead, it results in shareholders having a larger number of units with each unit cost decreasing to match the offering ratio. The value of an individual’s portfolio and the percentage of participation in the fund remain constant.
Although capitalization problems often seem unnecessary, they are indicators of a bull market in traditional markets.
Grayscale will follow Tesla, a California-based automotive and clean energy company that split its shares in August. After Tesla announced a stock split on August 11, stock prices soared 70% before the split took place on August 31. It could probably be a similar case for Grayscale.