Hedge fund manager Fir Tree Partners said Tuesday it has reached an agreement with Grayscale Investments that resolves a books-and-records lawsuit it had filed against Grayscale and its Grayscale Bitcoin Trust in December.
Grayscale voluntarily agreed to produce certain books and records in response to Fir Tree's demands, in return for which Fir Tree agreed to dismiss the litigation, Fir Tree said in a news release.
The lawsuit, filed the Delaware Court of Chancery, listed three Fir Tree-managed funds as plaintiffs and identified them as owning shares of the trust, known by the symbol GBTC. Plaintiffs "have serious questions about Grayscale's mismanagement of the Trust," the lawsuit said.
"Fir Tree is pleased that Grayscale is finally providing access to information that shareholders are entitled to receive under the GBTC trust agreement and Delaware law," Fir Tree's news release said.
The hedge fund manager, however, said it was disappointed that Grayscale's management refused to comply with Fir Tree's information rights for months and has still failed to address Fir Tree's continued concerns about GBTC's structure and the unavailability of redemptions.
Once Grayscale provides Fir Tree with the GBTC documents it has agreed to provide, Fir Tree will be able to further investigate Grayscale to determine Fir Tree's appropriate next steps, the release said.
Those steps may include filing additional litigation against Grayscale as well as against Grayscale's parent company, Digital Currency Group, and "their respective directors, officers and advisers, or others who should be held accountable for destroying billions of dollars of GBTC's market value," the release said.
In its December lawsuit, Fir Tree said that at that time GBTC shares were trading at a 40% to 45% discount to net asset value, which meant that for every dollar of bitcoin owned by the trust, its corresponding shares were worth only 55 cents. GBTC shares are currently trading at a roughly 28% discount to NAV.
"Over the last eight months, Grayscale has repeatedly rejected Fir Tree's suggestion that it permit redemptions of outstanding GBTC shares so that shareholders may recover some portion of their investment," the news release said.
While Fir Tree believes that would be "by far the easiest solution for shareholders to recoup the billions in value in GBTC that DCG and its affiliates have managed to wipe out," Fir Tree also reaffirmed in its release its call for another solution, which it proposed in March: that Grayscale conduct a tender offer for a "meaningful percentage" of outstanding GBTC shares.
"Fir Tree urges Grayscale to act in the best interests of all GBTC shareholders and finally commit to a long-overdue tender offer in order to unlock billions in immediate value for all shareholders who participate in a tender," the release said.
Grayscale "is pleased to resolve Fir Tree Partners' meritless lawsuit," a Grayscale spokeswoman said in an email Tuesday.
"It's widely understood that the conversion of GBTC to an ETF is the best long-term product structure for all investors," she said. "At Grayscale, we are 100% committed to that endeavor, and look forward to the D.C. Circuit Court's decision in our lawsuit against the SEC by the Fall of 2023."
A Fir Tree spokeswoman could not be reached for comment Tuesday.
