Value, Premiums, And The Madness of Crowds
A quick glance at Grayscale's single asset premiums, a rare fund trading at a sizeable discount, and the full history of MicroStrategy's share price relative to its BTC stack. Is a 2x multiple normal?
My latest for SA this afternoon focused on the Grayscale Digital Large Cap Fund $GDLC. I’ve been a fan of this trade at times. The setup in GDLC is a bit like when the market takes the “it’s so bad that it’s good” reaction to economic data. In my view, GDLC is such a poorly constructed product that occasionally it’s actually a great trading vehicle.
Quick summary: the fund trades at about a 37% discount to the Net Asset Value (NAV) of the fund. Though there are six different cryptos in the fund, more than 90% of the fund is allocated to the blue chips (Bitcoin & Ethereum). This is largely unique to this particular Grayscale fund as the company’s single asset products are now almost all trading at bonkers premiums:
I’ve covered this at least a half dozen times at this point, but it’s still blowing my mind. Most of these things are trading 3-8x the NAV. It is my view that this is nonsense since these funds simply hold the assets in custody and do nothing with them. If they were utilized in liquidity pools or staked for validation, I could understand a premium. That’s not happening here. To me, these premiums are ridiculous. And Grayscale seems to agree with me because they’ve reopened private placements in every single one of these funds:
What this means is accredited investors can buy these fund shares at NAV, wait out a lockup period and then dump the newly issued shares on retail investors via secondary sales. For example, let’s say I placed Solana with the Grayscale Solana Fund $GSOL at NAV. The current GSOL shares are valued at nearly $400 per on the open market. Via private placement, I’d be creating new shares for about $70. When share lockup expires, I can then sell those shares at whatever the market will give me for them - which again, is almost $400 at the moment. It’s quite the spread to say the least if it lasts.
The only question is will these premiums remain high between now and when lockups expire. It’s going to be fascinating to watch.
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