Grayscale Investor Laments GBTC’s “Abysmal” Discount
Marlton, a private investment firm that has a significant investment in Grayscale Bitcoin Trust Fund (GBTC), has approached Grayscale to present investors with a tender to protect them from the “abysmal” losses the Trust is currently suffering from. Marlton is one of several investors who are worried about the negative returns to the GBTC, a holder of over 3% of the entire Bitcoin in supply. Grayscale has lost a considerable amount of funds in the Trust. Yesterday, Marlton wrote a strongly-worded open letter to the Grayscale board of directors, referring to the discount in the GBTC current value as “abysmal.” Meanwhile, Grayscale has been making several attempts to push the price higher.
“Despite paying 2% management fees, our shares are trading at a discount” – Marlton
Marlton, who claims it has a significant investment in the venture, says GBTC investors have lost over $3 billion despite paying a management fee of 2%. Accordingly, it requests that Grayscale initiate a tender offer to enable shareholders to make higher returns than GBTC’s net asset value. A Malton official also told journalists that new GBTC investors might not suffer much loss because they are buying at a discount compared to long-term investors such as Marlton. Hence, he suggested that Grayscale intervene to cushion the effects of the losses on investors.
GBTC has been in negative territory for over a month. The GBTC grants investors exposure to Bitcoin without holding or buying the asset. Grayscale offers stocks in the trust that is almost the same as Bitcoin’s price. It keeps the asset in its custody on behalf of its investors, who will pay management fees in return. But because of the restrictions on shareholders’ rights, they can’t withdraw their funds whenever they want. Likewise, the trust shares don’t often tally with the actual price of Bitcoin.
Before now, GBTC had been selling at a premium for five consecutive years. But the five-year winning streak was halted in February as GBTC is now trading at an 8% discount. Hence, new entrants who invested when the price has already skyrocketed are suffering losses and not benefiting from the recent bullish momentum, which has seen the digital currency rise from $20,000 to $56,000. That is, people would spend more to buy shares in Bitcoin than real Bitcoin. The reason was that they could withdraw their profit at a premium in the future.
Marlton wants Grayscale to restore investors’ confidence
Marlton is a private investment firm owned by wealthy persons who are so conservative that they prefer to pay a firm the management fees to trade for them instead of undergoing the stress of sophisticated systems. Marlton is specially requesting that Grayscale offer a tender for shares. This option will practically allow the firm to buy back such shares within a short time for a specific value. Marlton stresses that it believes that a tender offer will likely limit the discount. This, it says, will restore investors’ confidence in Grayscale.
Until now, Grayscale has not responded to our correspondents’ request on the issue. But in a statement it issued earlier in the week, the firm aims to convert GBTC into an ETF (exchange-traded fund), an investment instrument similar to stock trading. This will enable the firm to reduce its management fees and reduce the gap between the share prices and the Bitcoin’s price. But the problem is that the SEC has refused to approve any of the Bitcoin ETF filings submitted by crypto firms. Hence, Grayscale might need to look for another alternative solution to the problem.