The Toronto-based company’s move follows early-December news that Fir Tree is suing Grayscale Investments for information to investigate potential mismanagement and conflicts of interest at its $10.6 billion Bitcoin investment product known as GBTC. The trust is trading at a near 50% discount to its underlying holdings, which 3iQ says it’s looking to remedy in the hope of restoring investor value and confidence at a time when both are “sorely needed.”
Grayscale has limited the rights of shareholders over time, 3iQ said in a Thursday statement, adding that prior to Fir Tree’s filing, it had engaged the GBTC parent with suggestions on how to narrow the discount on the Bitcoin trust — “but to no avail.”
GBTC was widely used by investors as a way to bet on Bitcoin, making it a key facet of the market and for a time representing a profitable trade when it was priced at a premium to the tokens it held. But unlike an exchange-traded fund, the trust can’t redeem shares to keep pace with cooling demand. So now, with the market reversing course, among other factors, it is trading at a discount to its underlying holdings, one that has widened to record levels in recent weeks as it sells off to a greater degree than the token itself.
Grayscale wants to convert GBTC into a physically backed Bitcoin ETF, a move the US Securities and Exchange Commission rebuffed in June; still, the firm has repeatedly said that it’s still hoping to get the conversion accomplished. Fir Tree wants to push Grayscale to erase the discount by lowering fees and resuming redemptions, Bloomberg News has reported.
Grayscale said earlier this week that it is considering appealing to US regulators to allow it to buy back shares of the Bitcoin trust, a process that would involve the company asking shareholders to sell back their GBTC shares at an agreed price.
In Thursday’s release, 3iQ said it encourages Grayscale “to offer a conversion feature for GBTC that allows the physical movement of Bitcoin to one of our current solutions. This would minimize the market impact of an immediate and wholescale redemption without burdening the courts or the taxpayer.”
“As a registered digital asset manager, 3iQ appreciates and understands the need to restore confidence among institutions and investors that believed GBTC was a long-term, cost-effective, and secure, physically backed investment vehicle,” 3iQ’s statement said. “Grayscale has been unresponsive to our outreach, however, 3iQ now calls on our clients, supporters, and peers in the regulated investment community to join this broader appeal. Together, we can help remedy GBTC’s discount and restore investor value and investor confidence.”