Leading asset manager Grayscale Investments is set to launch spinoffs of its exchange-traded funds (ETFs) Grayscale ethereum Trust (ETHE) and Grayscale bitcoin Trust (GBTC). Following inquiries from market watchers and potential investors, Bloomberg analyst James Seyffart has provided plenty of insight into the nature and workings of these spinoffs.
Grayscale ETF spin-off is based on 90-10% holding format, says Seyffart
On Friday, James Seyffart posted a x.com/JSeyff/status/1814347183522754773″ target=”_blank”>thread On social media platform x, vital information is being discussed regarding Grayscale’s ETF derivatives, Grayscale ethereum Mini Trust (eth) and Grayscale bitcoin Mini Trust (btc), which are based on the company’s ETHE and GBTC funds respectively.
Related reading: BlackRock overtakes Grayscale to become world's largest bitcoin fund with $20 billion in assets under management
An ETF split occurs when a portion of an ETF's holdings is separated into a new, independent ETF. In this process, shareholders of the original ETF, i.e. EHTE and GBTC, automatically receive shares of the new ETF, i.e. eth and btc. However, the amount each shareholder receives is proportional to their holdings in the original ETF and the split's distribution formula.
<blockquote class="twitter-tweet” data-width=”500″ data-dnt=”true”>
Make a thread about the situation of twitter.com/Grayscale?ref_src=twsrc%5Etfw”>@GrayscaleThe spin-off of twitter.com/search?q=%24ETHE&src=ctag&ref_src=twsrc%5Etfw”>$eth & twitter.com/search?q=%24ETH&src=ctag&ref_src=twsrc%5Etfw”>$Ether because I've gotten about a million questions about it. The mechanics will be basically the same for twitter.com/search?q=%24GBTC&src=ctag&ref_src=twsrc%5Etfw”>$GBTC & twitter.com/search?q=%24BTC&src=ctag&ref_src=twsrc%5Etfw”>$btc spin-off. If you own 1,000 shares of twitter.com/search?q=%24ETHE&src=ctag&ref_src=twsrc%5Etfw”>$ethYou should receive 1,000 shares of mini twitter.com/search?q=%24ETH&src=ctag&ref_src=twsrc%5Etfw”>$Ether. 1/ photo.twitter.com/Er66mj5L46
—James Seyffart (@JSeyff) twitter.com/JSeyff/status/1814347183522754773?ref_src=twsrc%5Etfw”>July 19, 2024
Seyffart explains that Grayscale’s spinoffs are based on the same mechanics, whereby if you own 1,000 shares of ETHE or GBTC, you will receive 1,000 shares of eth or btc. However, in terms of value, Seyffart claims that an initial $1,000 worth of ETHE or GBTC will be reduced to $900, while shares in the new ETFs accumulate to a value of $100, implying that Grayscale is employing a 90-10% split formula.
Furthermore, the Bloomberg analyst highlighted that ETHE’s spinoff is scheduled for July 23, while GBTC’s will occur on July 31. However, to be eligible for the new ETFs’ share distributions, investors would need to have purchased shares of these original funds before or on the record dates for these spinoffs, which are July 18 for ETHE and July 30 for btc. Thereafter, investors will have to purchase eth shares as a separate, standalone fund.
Seyffart notes that ETHE’s registration date has already passed and claims that the ETF’s low price at the start of trading was due to the splitting process that day. The analyst warns investors to expect a similar fate for GBTC on July 30.
The Significance of Grayscale's ETF Spin-Offs
Spin-offs are usually carried out for a variety of reasons, but with the aim of meeting a more specific demand. According to Grayscale, its latest spin-offs are aimed at offering investors the option to purchase a similar product, but at lower fees. To put this into context, the proposed eth spin-off will be accompanied by a sponsorship fee of just 0.15%, which is quite low compared to ETHE’s 2.5% fee.
Related Reading: Related Reading: Bitwise CIO Bullish on ethereum ETFs Driving Surge to All-Time 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 past 24 hours.
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