Friday, June 14, 2024

GBTC Litigation: Fir Tree and Grayscale Reach Agreement

Fir Tree Partners, a significant shareholder of the Grayscale Bitcoin Trust (GBTC), and Grayscale Investments have reached an agreement resolving a lawsuit filed by Fir Tree in December 2022. The litigation sought documents and information from Grayscale about potential mismanagement and conflicts of interest at GBTC.

The lawsuit highlighted Fir Tree’s concerns about Grayscale’s refusal to allow redemptions despite no relevant regulatory restrictions, GBTC’s extensive conflicts of interest and lack of independent oversight, and its campaign to convert GBTC into an ETF.

Under the terms of the agreement, Grayscale has agreed to voluntarily produce certain books and records in response to Fir Tree’s demand. In return, Fir Tree has agreed to dismiss its books-and-records litigation against Grayscale.

Despite this agreement, Fir Tree expressed disappointment that Grayscale management refused to comply with Fir Tree’s information rights for months and has still failed to address concerns about GBTC’s structure and the unavailability of redemptions.

Fir Tree has proposed a simple solution for GBTC, suggesting that Grayscale permit redemptions of outstanding GBTC shares so that shareholders may recover some portion of their investment. This proposal has been repeatedly rejected by Grayscale over the last eight months.

In March 2023, Fir Tree proposed an alternative solution: that Grayscale conduct a tender offer for a meaningful percentage of outstanding GBTC shares. This proposal was also rejected by Grayscale and DCG.

Fir Tree believes that a tender offer could unlock significant value for GBTC shareholders, DCG, and Genesis creditors. For example, if Grayscale were to conduct a tender offer for 20% of shares outstanding at 94% of NAV, it could potentially unlock $3.6 billion in immediate value for GBTC shareholders who participate in the tender offer.

Fir Tree urges Grayscale to act in the best interests of all GBTC shareholders and finally commit to a long-overdue tender offer to unlock billions in immediate value for all shareholders who participate in a tender.

Image source: Shutterstock

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