Grayscale Investments, the company behind the bitcoin stock traded trust (GBTC), has announced the board’s approval to buy up to $250 million GBTC shares. They say, and we quote in full:
“On March 10, 2021, the board (the “Board”) of Grayscale Investments, LLC, the sponsor (the “Sponsor”) of Grayscale Bitcoin Trust (BTC) (the “Trust”), approved the purchase by Digital Currency Group, Inc. (“DCG”), the parent company of the Sponsor, of up to $250 million worth of shares of the Trust.
Subsequently, DCG authorized such purchase. DCG plans to use cash on hand to fund the purchases and will make the purchases on the open market, at management’s discretion, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934 (the “Exchange Act”).
The share purchase authorization does not obligate DCG to acquire any specific number of shares in any period, and may be expanded, extended, modified, or discontinued at any time.
The actual timing, amount and value of share purchases will depend entirely upon a number of factors, including the levels of cash available, price, and prevailing market conditions.
DCG will not effect any purchases while the Trust is engaged in private placement activities or immediately prior to the commencement of such activities.
Information regarding stock purchases will be available in the Trust’s periodic reports filed with the Securities and Exchange Commission.”
GBTC has seen a discount to the spot price following a crash in bitcoin last month with it still trading below spot as one GBTC share, worth 0.00094643 bitcoin, goes for $50 currently while in the open market the bitcoins would be worth $53.11 at the current price.
There has been speculation some of the huge GBTC purchases during December and January were for arbitrage due to its then significant premium.
That arbitrage may have led to this discount with GBTC shares backed by bitcoin in a six months lagging manner as once the share is minted, it can not be transferred for six months.
To narrow this discount, GBTC is now planning to buy their own shares presumably so as to maintain the bitcoin peg.