Grayscale and Fir Tree Partners resolve their lawsuit, addressing concerns of mismanagement at Grayscale Bitcoin Trust, while the proposal for redemptions and unlocking shareholder value remains unresolved.
- Grayscale and Fir Tree Partners resolve the lawsuit regarding concerns of mismanagement and conflicts of interest at Grayscale Bitcoin Trust (GBTC).
- Grayscale agrees to produce certain books and records in response to Fir Tree’s demands, and Fir Tree dismisses its books-and-records lawsuit.
- Fir Tree expresses disappointment with Grayscale’s refusal to comply with information rights and proposes allowing redemptions of outstanding GBTC shares as a solution.
Grayscale Investments and Fir Tree Partners, a significant shareholder of the Grayscale Bitcoin Trust (GBTC), have recently resolved a lawsuit filed by Fir Tree in December 2022. The lawsuit raised concerns about potential mismanagement and conflicts of interest at GBTC, as well as Grayscale’s refusal to allow redemptions and its efforts to convert GBTC into an ETF.
— Pushpendra Singh Digital (@PushpendraTech) July 12, 2023
The Lawsuit and Concerns
Fir Tree’s litigation highlighted several key concerns regarding GBTC and Grayscale. These included Grayscale’s refusal to permit redemptions despite the absence of regulatory restrictions, the extensive conflicts of interest within GBTC, the lack of independent oversight, and Grayscale’s campaign to transform GBTC into an ETF.
As part of the agreement, Grayscale has voluntarily agreed to produce certain books and records in response to Fir Tree’s demands. In return, Fir Tree has agreed to dismiss its books-and-records lawsuit against Grayscale.
Continued Disappointment and Proposed Solutions
Although an agreement has been reached, Fir Tree expressed disappointment regarding Grayscale management’s refusal to comply with Fir Tree’s information rights for several months. Moreover, concerns about GBTC’s structure and the unavailability of redemptions have yet to be addressed.
Fir Tree has proposed a straightforward solution for GBTC, suggesting that Grayscale allow redemptions of outstanding GBTC shares to enable shareholders to recover a portion of their investment. However, Grayscale has consistently rejected this proposal over the past eight months.
In March 2023, Fir Tree presented an alternative solution: Grayscale conducting a tender offer for a significant percentage of outstanding GBTC shares. Unfortunately, this proposal was also rejected by Grayscale and DCG.
Fir Tree believes that a tender offer could unlock substantial value for GBTC shareholders, DCG, and Genesis creditors. For instance, conducting a tender offer for 20% of shares outstanding at 94% of NAV could potentially unlock $3.6 billion in immediate value for participating GBTC shareholders.
In light of these possibilities, Fir Tree urges Grayscale to prioritize the best interests of all GBTC shareholders and finally commit to a long-overdue tender offer. This offer would allow all shareholders who participate to enjoy the immediate value unlocked by the tender.
It remains to be seen whether Grayscale will heed Fir Tree’s call and take action that benefits the shareholders of GBTC.