Chicago-based private equity firm Marlton Partners has urged Grayscale Investments to accept an amended bid for GBTC shares in a Dutch auction. According to Marlton, such a takeover bid would significantly reduce, if not eliminate, the discount to net asset value (NAV). This gives shareholders confidence in the sponsor’s ability to manage the fund’s rebate.
Depreciation in billions
Despite GBTC’s competitive advantage as the world’s largest bitcoin fund, GBTC shares continue to trade at a significant discount to net asset value. According to Marlton Partners, this discount to NAV now represents a loss of value of more than $3.1 billion for the trust’s shareholders.
Meanwhile, James C. Elbaor, managing director of Marlton Partners, insists in an open letter to Grayscale Investments management that previous attempts to eliminate the discount have been inadequate. To support this argument, Elbaor cites the recent announcement by the Digital Currency Group (DCG), which plans to buy up to $250 million worth of GBTC shares. In the letter, Elbaor stated:
Notwithstanding its usefulness, as you acknowledge in your press release announcing the transaction, this action does not obligate DCG to purchase any particular number of shares during any particular period and may be modified or terminated at any time without notice.
According to Elbaor, the market reaction to DCG’s announcement already proves the inefficiency of such a sanctioned purchase. At the time of writing, the discount on GBTC shares has risen to 11.45%.
Modified Dutch auction bids
Meanwhile, Elbaor argues that Marlton’s proposed takeover bid system allows shareholders to sell their shares at a fixed price. This can be done within a certain time frame at an offer price above the market price and (depends on) the minimum or maximum number of shares sold, he said.
In addition, board member Grayscale says a clear plan to allocate capital through a takeover bid for GBTC will put you and GBTC in the spotlight as the only digital currency asset manager that creates shareholder value worth its 2% management fee, in addition to being the only digital currency.
Meanwhile, Elbaor says he expects these conversations (with Grayscale) to be productive, but he stresses that Marlton Partners reserves all rights to take further steps to protect our investment and that of other shareholders.
Do you think the auction system will remove the discount on GBTC shares? Tell us what you think in the comments below.
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