Valkyrie co-founder and CIO, Steven McClurg, revealed that his firm wants to become new sponsor of Grayscale's GBTC.

Valkyrie aims to become New Sponsor of Grayscale’s GBTC

  • Valkyrie co-founder and CIO, Steven McClurg, revealed that his firm wants to become new sponsor of Grayscale’s GBTC.
  • However, a vote of at least a majority, or 50% of the shares, is required to change the trust agreement.
  • Valkyrie would “immediately file for Reg M exemption” if it were to be chosen as GBTC’s sponsor and manager.
  • The goal is to solve the biggest issue that GBTC is facing, i.e., a 47% discount on its shares.

Leading financial services firm Valkyrie Investments has recently laid out a proposal to become the new sponsor and manager of the troubled Grayscale Bitcoin Trust (GBTC).

On December 28, Valkyrie’s co-founder and CIO, Steven McClurg, wrote on the company’s website that his company recognizes the important role of Grayscale in the development and growth of the Bitcoin ecosystem.

“However, in light of recent events involving Grayscale and its family of affiliated companies, it is time for a change. Valkyrie is the best company to manage GBTC to ensure its investors are treated fairly,” he stated.

McClurg stated that the current GBTC shareholders would use proxies to vote on the proposal. However, as highlighted by Bloomberg, the process is not as simple as it seems.

According to Grayscale documents, shareholders have very few voting powers and no influence over how the trust is managed. A vote of at least a majority, or 50% of the shares, is required to change the trust agreement in a way that could materially affect shareholders’ interests.

Valkyrie’s Plans if the Takeover Happens

McClurg said Valkyrie is aware of the problems and has planned accordingly. He said that this wouldn’t be the company’s first time accomplishing such a goal but chose not to elaborate on any specifics of what the plan might include. He has a clear plan in place for what will happen if a takeover happens.

The executive explained that Valkyrie would “immediately file for Reg M exemption” if it were to be chosen as GBTC’s sponsor and manager.

If the United States Securities and Exchange Commission (SEC) grants the exception, McClurg said, “it would allow us to redeem shares at par value for shareholders who want to redeem.”

The action would supposedly help in resolving what may be GBTC’s most serious issue at the moment: a massive 47% discount of its shares relative to the value of the underlying assets owned. 

“Redemptions typically cause a discount to narrow due to the ability of market makers to arbitrage,” Valkyrie’s co-founder added.

McClurg stated that his company has also planned to lower the management fee from the 200 basis points that Grayscale presently levies to 75 basis points.

Grayscale may have already requested a Reg M exemption, although it is unclear from McClurg’s statement that “nothing is stopping Grayscale from doing this themselves.” 

The current manager of GBTC is urging that the trust be changed into a spot bitcoin exchange-traded fund, which, according to the manager, would eliminate the discount because an ETF can issue and redeem shares on demand. 

It has even gone so far as to file a lawsuit against the SEC on the grounds that the regulatory agency had the power to prohibit such spot offerings while allowing the listing of futures-based products.

This may help explain why the company is hesitant to apply for a Reg M exemption because the discount might be reduced to almost nothing and its leverage for the ETF move would be eliminated in the event that the SEC grants the exemption.

Even if Valkyrie became the manager of GBTC, it would still pursue the conversion. The executive stated:

“We would still attempt a conversion, but would work with regulators for an orderly conversion on their time.”

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A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.

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