Sell, Merge, Or Dissolve: Osprey To Sunset Its OTC Bitcoin Trust

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The closed-end Bitcoin fund is exploring strategic alternatives like merger or sale to counter the discounted selling point of its units. 

Osprey's Strategic Decision

In a statement released Tuesday, Osprey Bitcoin Trust (OBTC) announced that it is considering selling the Trust or merging with an existing Bitcoin ETF. 

The statement claimed, 

“As part of the strategic process, the Sponsor plans to consider a wide range of options and is in various discussions about a potential sale of the Trust to, or merger with, an existing Bitcoin ETF.” 

The decision stems from a realization that the common units of fractional undivided beneficial interest of the Trust were trading at a fraction of the cost of Bitcoin. 

Potential Outcomes

The Sponsor has also considered the situation where neither is possible. In such a case where no sale or potential merger deal can be worked out, the Sponsor has stated its intentions to liquidate and dissolve the trust within the next 180 days. This would entail filing Form 15 with the US Securities and Exchange Commission (SEC) for deregistration. 

Despite this uncertainty, the announcement had a significant impact on the unit price, which surged from $15.98 on March 4 to $20.68 on March 5 before settling at $19.17 at the time of writing.

Previous Efforts and Challenges

Founder and CEO Greg King highlighted the company's endeavors toward positive financial results, including a tender offer filed with the SEC on January 11. This offer aimed to purchase 20% of its units at the net asset value, minus taxes and fees. However, the tender proposal faced criticism, leading King to express his disappointment on the X.com platform, citing challenges typical of Washington politics.

 King wrote:

“To be clear, the ‘tender offer’ can also be considered a redemption program. US regs require it be filed as a ‘tender offer.’ Any eligible $OBTC shareholder who follows the rules receives NAV less the fee at the conclusion of the tender as described.”

Osprey vs. Grayscale

Before this announcement, Osprey explored the possibility of taking over management of Grayscale’s Bitcoin trust. This attempt followed Osprey's debut of its over-the-counter BTC trust in January 2021, offering accredited investors exposure to BTC within brokerage accounts. However, the trust struggled during the crypto winter, leading to significant layoffs by January 2023. Osprey subsequently sued Grayscale, alleging false and misleading advertising that contributed to Grayscale's dominance in the market.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice. 

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