We advised Grayscale on the largest ever initial seeding of an ETF, and SEC approval for the NYSE Arca listing

Davis Polk advised Grayscale Investments, LLC on the formation, initial seeding and successful listing of Grayscale Bitcoin Mini Trust (“BTC”) as an exchange-traded fund, or ETF. Grayscale seeded the BTC trust through a contribution by Grayscale Bitcoin Trust (“GBTC”) of 10% of its bitcoin, with a current market value of approximately $1.8 billion, to the BTC trust as consideration and in exchange for newly created shares of the BTC trust, which were then distributed pro rata to shareholders of GBTC. Similar to GBTC, the BTC trust will offer investors exposure to bitcoin through traditional securities brokerage and retirement savings accounts, but with a materially lower management fee as compared with GBTC.

Shares of the trust are listed on NYSE Arca under the ticker “BTC.” Approval of the ETF application and listing does not indicate Securities and Exchange Commission approval of the investment opportunity.

Davis Polk advised Grayscale on the structuring of this novel transaction, which is akin to a corporate spinoff, representing the largest ever initial seeding of an ETF to our knowledge. The transaction also represents only the second time that an ETF has ever been seeded through a contribution of assets and distribution of shares to the holders of another publicly traded investment product, following last week’s initial seeding and listing of the Grayscale Ethereum Mini Trust, a transaction which Davis Polk also advised on.

The Davis Polk capital markets team included partners Dan Gibbons and Joseph A. Hall and associates Dylan H. Lojac, Agustin N. Lopez Roualdes and Ryan Mainous. Partners Zachary J. Zweihorn and Gabe Rosenberg provided financial institutions advice. The tax team included partners Patrick E. Sigmon and Lucy W. Farr and associate Ted Lee. Members of the Davis Polk team are based in the New York and Washington DC offices.

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