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Grayscale may ‘ultimately’ consider tender offer for bitcoin trust, if lawsuit against SEC fails, CEO says

MarketWatch logo MarketWatch 1/24/2023 Frances Yue
© MarketWatch photo illustration/iStockphoto
CRYPTO

Michael Sonnenshein, chief executive at digital asset manager Grayscale Investments, said Tuesday the company would consider providing a tender offer to redeem shares of its bitcoin trust, if it exhausts all the options to push for the trust fund’s conversion to an exchange-traded fund. 

Sonnenshein didn’t mention details of the potential tender offer. In a letter to investors in December, Sonnenshein said Grayscale may consider a tender offer for up to 20% shares of Grayscale bitcoin trust while it is subject to the approval of the U.S. Securities and Exchange Commission that the agency “may not provide.”

Sonnenshein said in an CNBC Tuesday interview that he is expecting decisions from the court in the second or third quarter of this year for its lawsuit challenging the SEC’s decision to deny GBTC’s conversion into an ETF. 

“If we do exhaust all the judicial options to challenge the SEC stance on this product, we would entertain working constructively with regulators and shareholders to offer a tender offer,” Sonnenshein told CNBC Tuesday. 

GBTC, the world’s largest bitcoin fund, has been trading at a discount to the underlying bitcoin it holds since February 2021, while investors don’t have options to redeem their shares. If the closed-ended bitcoin trust could be converted into an ETF, the discount is expected to disappear as investors redeem their shares through the usual process.

Investors have been paying close attention to the fate of GBTC, as Grayscale’s sister company Genesis filed for bankruptcy last week, while its parent company Digital Currency Group scrambled to raise capital. 

The District of Columbia Court of Appeals has set to hear the oral argument of the lawsuits on March 7, according to Sonnenshein and a court filing. 

As bitcoin rose above $22,000 from below $17,000 since the start of this year, GBTC’s discount to the bitcoin it holds have narrowed to 41% on Monday from 49% in mid-December, according to data from CryptoQuant.

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