This week the sponsor of the Bitcoin Investment Trust, Grayscale Investments has announced the launch of a 91-for-1 stock split of the Trust’s issued and outstanding shares. According to Grayscale, the division will take place on January 26 and shareholders will receive 90 more shares on top of their original shares held.
Grayscale Investments, Bitcoin Investment Trust (OTCQX: GBTC) is a popular investment fund based on the price of bitcoins held in reserves. Most investment trusts own a fixed amount of the asset and investors purchase shares of the Net Asset Value (NAV). One GBTC share is worth around 1/10th of BTC and users also pay portfolio maintenance fees. Investors like GBTC because it is considered one of the only stock tied to real bitcoins that are offered on a public stock market. Because BTC values have rallied for well over a year GBTC prices have followed suit making the price per share a bit expensive for some. Unlike purchasing bitcoins in fractions, investors have to buy an entire share to get in on GBTC investing. The increased price has made it harder for ordinary retail investors to buy shares so Grayscale has decided to create a stock split.
From $1,800 Shares to $18 Per GBTC
Basically a stock split or divide increased the number of shares allocated to the investment vehicle. For instance right now Grayscale holds 1,916,600 shares of GBTC and one share is worth 0.09242821 BTC. If a user purchases ten shares, then they have the equivalent of 1 BTC and Grayscale holds a total of roughly 170,000 BTC. With the launch of a 91-for-1 stock split every share that’s worth .092 BTC will drop to 0.00101 BTC. After the split, there will be 174,410,600 GBTC shares in circulation. Grayscale believes the move will make GBTC shares more affordable and it will entice retail investors. Currently, one GBTC share is roughly around $1,767 USD, and after the split, it will be worth about $17.60 respectively.
“It is the only product (of its kind) available to investors for purchase at net asset value,” explains the Grayscale director Michael Sonnenshein in a recent video interview.
The Possibility of Even More Shares and Automatic Issuance
Grayscale also reveals that the stock split could result in more shares than estimated on January 26.
“After the close of business on the record date, the Trust will announce the total number of shares that will be issued and outstanding immediately after effectiveness of the stock split on January 26, 2018, which will give effect to any such new shares created after the date of this press release and up through the record date,” Grayscale Investments details.
Shareholders are not required to take any action to receive the shares in connection with the stock split and they will not be required to surrender or exchange their shares in the Trust — The transfer agent will automatically issue the new shares in the stock split.
Stock Splits Can Affect a Stocks Overall Value Either Negatively Or In a Positive Way
Stock splits happen all the time in the financial world, but it’s interesting to see the method applied to an investment fund based on actual bitcoins held in storage. There are two scenarios that could happen when more GBTC shares become available as far as the stock’s price. One, the market could get over diluted, and the price drops in value at some point after the split; or, the split shares could make the overall asset holdings increase in value while also creating more accessibility to ‘average Joe’ investors. Grayscale is hoping for the latter outcome.
What do you think about Grayscale splitting GBTC? Let us know your thoughts in the comments below.
Images via Pixabay, Grayscale, and Google Finance.