Michael Sonnenshein, CEO of Grayscale Investments, a leading cryptocurrency asset management firm, said the company is not ruling out a takeover bid for its Grayscale Bitcoin Trust fund (quotation GBTC).
Sonnenshein made this revelation in his year-end letter to investors. The CEO specified that the offer would only come into play if all attempts to convert the flagship Bitcoin fund into an ETF fail.
If we are unsuccessful in our legal challenge in all applicable courts… we will explore other options to return a portion of GBTC's capital to shareholders. These options could include a tender offer for a portion of the outstanding shares of GBTC,
The tender offer will not exceed 20% of GBTC's outstanding shares. Grayscale will also need regulatory "relief" from the SEC and shareholder approval to facilitate the tender offer, he added.
Meanwhile, Grayscale does not intend to dissolve GBTC if the tender offer option also fails. According to Sonnenshein, Grayscale will continue to operate GBTC without an ongoing redemption program, as it currently does.
Additionally, Grayscale is confident its bid to convert GBTC into a spot Bitcoin ETF will be successful. The firm took the SEC to court as early as July and filed its first legal brief in the case in October. The SEC also filed its brief, which Grayscale must respond to by January 2023. Final briefs are expected in February, after which a three-judge panel will rule on the case.
Sonnenshein told investors that Grayscale is confident the court will accept its "strong, common sense and compelling legal arguments."
Is the end of GBTC's massive discount in sight?
Sonnenshein's letter comes at a time when the GBTC fund has been trading at a significant discount. GBTC has over $10,68 billion worth of BTC under management, making it the largest Bitcoin fund globally.
However, the fund's shares are trading at a discount to net asset value (NAV) of approximately -46,37%, according to data from YCharts at the time of writing. The value of the fund's BTC holdings is therefore approximately $5,48 billion.
Discussing the situation, Sonnenshein noted that not converting to an ETF was a large contributor to the trend. She added that market volatility caused by parent company concerns also contributed. However, she assured investors that Grayscale remains sheltered from Digital Currency Groups' financial woes with Genesis.