Grayscale may return 20% of GBTC’s capital only if these conditions are met

• Grayscale Investments has been in a legal battle with SEC since 2021.
• The SEC refused the firm’s request for a spot Bitcoin exchange, leading to the tussle.

Grayscale Investments, the firm behind the Grayscale Bitcoin Trust (GBTC), indicated that it may return a portion of the world’s largest Bitcoin [BTC] fund to investors. This would be the case if its ongoing feud with the Securities and Exchange Commission doesn’t end favorably. 

Grayscale Investment’s feud with the SEC

In October 2021, Grayscale Investments filed paperwork with the SEC to turn their $10 billion Bitcoin investment vehicle into a spot Bitcoin exchange traded fund (ETF). After multiple delays in its rulings, the SEC finally rejected Grayscale’s request on 29 June, 2022. 

Within hours of the rejection, Grayscale announced that it would be suing the wall street regulator. Subsequently, a petition was filed in the United States Court of Appeals for the District of Columbia Circuit, challenging the SEC’s decision.

Tender offer for 20% of GBTC’s outstanding shares

According to a report by The Wall Street Journal, Michael Sonnenshein, the CEO of Grayscale Investments, revealed the potential capital return plan in a letter to the company’s investors. 

The letter revealed that the company could announce a tender offer for up to 20% of the outstanding shares of the Grayscale Bitcoin Trust. It further read,

“A tender offer would make a direct appeal to shareholders to sell—or tender—their shares at a specific price during a certain time.” 

The CEO’s letter came at a time when investors grew increasingly concerned about their investments. Earlier this week, the wall street regulator doubled down on its decision to reject the spot ETF request. It cited a lack of federal oversight. Morever, the falling price of Bitcoin [BTC] caused GBTC’s discount to net asset value (NAL) to reach record lows.

Data from YCHARTS showed that the discount to NAL reached an all-time low of -48.89% on 13 December, 2022. 

The fear and uncertainty associated with Grayscale’s parent firm, Digital Currency Group, also had investors worried. The solvency concerns surrounding one of DCG’s subsidiaries, Genesis Global Trading, made matters worse.