Grayscale Weighs Tender Offer for 20% of Its Deeply Discounted Bitcoin Trust Shares

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With the Grayscale Bitcoin Trust (GBTC) reaching bigger discounts day by day, the company’s CEO is now considering new options to support investors if the trust fails to convert into a Bitcoin ETF.

Grayscale’s flagship offering offers more traditional investors an easy way to gain exposure to Bitcoin without needing to buy or hold Bitcoin themselves. In June, Grayscale filed a lawsuit against the SEC after the regulator again rejected the company’s spot Bitcoin ETF application.

“If we are unsuccessful in our legal challenge in all applicable courts and conclude that there is no possibility of legislative or regulatory clarity that would permit the conversion of GBTC to an ETF within a reasonable timeframe, we would explore other options to return some of GBTC’s capital to shareholders,” Grayscale CEO Michael Sonnenshein wrote in a year-end letter to investors on Monday.

Sonnenshein claimed that the company is still determined to get its application approved and convert its struggling Bitcoin trust into a spot ETF. The SEC has not always approved any spot Bitcoin ETFs in the United States, only Bitcoin futures ETFs, which are tied to bets on the future price of Bitcoin rather than the current price.

In the meantime, Grayscale is now considering whether to make a tender offer for 20% of the outstanding shares of Grayscale Bitcoin Trust (GBTC). In order to make such an offer, Grayscale would need shareholder approval to amend GBTC’s trust agreement, which currently does not permit the takeover of GBTC. It would also require the SEC to lift “certain requirements” relating to the execution of takeover bids.

If these approvals occur, then Grayscale expects to “continue to operate GBTC without an ongoing buyback program until we are successful in converting it to a spot bitcoin ETF.”

The Great Grayscale Bitcoin Discount

Sonneshein’s eagerness to convert GBTC into a spot Bitcoin ETF is due to the growing gap between GBTC’s price and the underlying Bitcoin price it is meant to track.

According to YCharts, GBTC shares are currently trading at a 48.57% discount to actual Bitcoin. GBTC started trading at a discount in February 2021.

This discount arose due to market volatility and the inability of shareholders to redeem their shares against the underlying. There is no way for investors to buy shares at a discount, redeem Bitcoin, and sell Bitcoin at a profit to arbitrate the difference.

If Grayscale’s Bitcoin ETF dreams come true, this trade would become readily available.

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