Here’s What To Know On Grayscale Bitcoin & Ethereum ETF Spinoffs – Details
July 20 2024 - 1:00PM
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Prominent asset manager Grayscale Investments is set to launch
spinoffs of their Grayscale Ethereum Trust’s (ETHE) and Grayscale
Bitcoin Trust (GBTC) exchange-traded funds (ETF). Following
inquiries by market spectators and potential investors, Bloomberg
analyst James Seyffart has provided much insight into the nature
and operation of these spinoffs. Grayscale ETF Spinoff Based On
90-10% Sharing Format, Seyffart Says On Friday, James Seyffart
published a thread on social media platform X, discussing vital
information about Grayscale’s ETF spin-offs Grayscale Ethereum Mini
Trust (ETH) and Grayscale Bitcoin Mini Trust (BTC), which are based
on the company’s ETHE and GBTC’s funds respectively. Related
Reading: BlackRock Overtakes Grayscale To Become The Largest
Bitcoin Fund In The World With $20 Billion AUM An ETF spinoff
occurs when a portion of an ETF’s holdings is separated into a new,
independent ETF. In this process, shareholders of the original ETF,
i.e. EHTE and GBTC, automatically receive shares of the new ETF,
i.e. ETH and BTC. However, the amount each shareholder receives is
proportional to their holdings in the original ETF and the sharing
formula of the spinoff. Seyffart explains that
Grayscale spinoffs are based on the same mechanics, whereby if you
have 1000 shares of ETHE or GBTC, you will receive 1000
shares of ETH or BTC. Nevertheless, in terms of value,
Seyffart states that an initial $1000 worth of ETHE or GBTC will
decrease to $900, while the shares in the new ETFs accumulate a
value of $100, implying that Grayscale is employing a 90-10%
sharing formula. Furthermore, the Bloomberg analyst
highlighted that the spinoff for ETHE is programmed for July 23,
while that of GBTC will occur on July 31. However, to be
eligible for share distributions from the new ETFs, investors
should have purchased shares in these original funds before or on
the record dates for these spin-offs, which are July 18th for ETHE
and July 30 for BTC. Thereafter, investors will have to purchase
shares of ETH as a separate, independent fund. Seyffart notes the
record date for ETHE is already past, stating the low price of the
ETF at the start of trading was due to the spinoff process on that
day. The analyst warns investors to anticipate a similar fate for
GBTC on July 30. Importance Of Grayscale’s ETF Spinoffs Spinoffs
are generally conducted for various reasons but with the aim of
satisfying a more focused demand. According to Grayscale, their
latest spinoffs aim to offer investors the choice of buying a
similar product but at lower fees. For context, the proposed ETH
spin-off will be accompanied by a sponsor fee of only 0.15% which
is quite low in comparison to ETHE’s 2.5% fee. Related Reading:
Related Reading: Bitwise CIO Bullish On Ethereum ETFs Fueling Surge
To Record Highs Above $5,000 Currently, both ETHE and GBTC continue
to trade at $29.71 and $59.68, respectively, with a market gain of
3.31% and 5.82% in the last 24 hours. Featured image from The
Economic Times, chart from Tradingview
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