Shares of Bitcoin Investment Trust (GBTC 4.45%) will soon undergo a 91-for-1 stock split in which shareholders will receive 90 more shares for each share they currently own. The split will take effect on Jan. 26, according to a press release from its sponsor, Grayscale Investments.
Though it may seem odd at first glance -- rarely do companies ever split their shares into so many pieces -- the split is a convenient event for people who follow it closely. Each share of the trust currently represents ownership of about 0.0918 bitcoins. After the split, shares will be equivalent to owning about 0.001 bitcoins each.
The split makes the mental math of knowing what the trust should be worth a lot easier for its shareholders. After the split, if one bitcoin trades for $11,000, then investors will know that the value of the Bitcoin Investment Trust's bitcoin holdings should approximate $11 per share, for example.
|
Time Period |
Shares Needed to Control 1 Bitcoin |
|---|---|
|
Pre-split |
10.89 |
|
Post-split |
991.15 |
Data sources: Grayscale Investments. Calculations by author.
New demand?
Save for a relatively trivial number of shares held by institutional investors (believe it or not, the best-performing ETF in 2017 was a GBTC shareholder!), the vast majority of Bitcoin Investment Trust shares are held by retail investors who enjoy the convenience of getting exposure to bitcoin through an ordinary brokerage account.
A split may make the trust's shares more digestible for investors with smaller account sizes. Individual investors who may have balked at the $1,670-per-share price at which Bitcoin Investment Trust closed on Wednesday may be more inclined to buy shares at a price of $18.35 each, the implied split-adjusted closing price after the 91-for-1 stock split takes place.
Bitcoin Investment Trust often ranks as one of the most popular stocks at Fidelity and TD Ameritrade, two retail brokerages that disclose which stocks their clients are trading or looking up most frequently. When the stock split takes effect on Jan. 26, those who were previously priced out will finally get the opportunity to buy a few shares for their account.
Image source: Getty Images.
Competition for the "crypto trade"
Though the Bitcoin Investment Trust may be the only way to buy and sell bitcoin through a traditional stock brokerage account, alternatives are popping up by the day. Launched in December, bitcoin futures have already passed GBTC in terms of bitcoin equivalent traded daily.
|
Bitcoin Proxy |
Bitcoin Equivalent Traded Daily (10-Day Average) |
|---|---|
|
8,706 bitcoins | |
|
6,413 bitcoins | |
|
4,649 bitcoins |
Data sources: CNBC, Grayscale Investments. Calculations by author.
Bitcoin Investment Trust holds bitcoin directly, and futures are designed to roughly track bitcoin's price on certain online exchanges. But other products may be stealing some of Bitcoin Investment Trust's fanfare.
Two fund managers recently launched exchange-traded funds (ETFs) that invest in stocks with some exposure to the adoption of blockchain technology. The Reality Shares Nasdaq NexGen Economy ETF (BLCN 2.67%) tracks a passive portfolio of blockchain stocks. The Amplify Transformational Data Sharing ETF (BLOK 4.63%) is an actively managed blockchain ETF with a similar mix of stocks. (At the time of writing, neither ETF holds bitcoin or other cryptocurrencies.)
To say these brand-new ETFs are popular among investors is an understatement. Even if most of the stocks they own have little, if any, serious exposure to bitcoin or blockchain, the two ETFs have quickly amassed about $233 million of assets between them in just six trading days. Bitcoin Investment Trust's stock split may have a lot to do with keeping its place as retail investors' favorite way to bet on bitcoin or blockchain.
The trust's premium is what matters most
Whether you own one share of Bitcoin Investment Trust before the split, or 91 shares after, you'll still own approximately 0.0918 bitcoins, and the value of your shares should continue to roughly follow the price of bitcoin up and down thereafter.
Of course, the most important number isn't how many shares you hold, but the price of each share relative to the value of the bitcoins backing them. Shares of Bitcoin Investment Trust have historically traded as high as 2.32 times the underlying value of its digital currency holdings, though on the median day it closes at a price about 1.42 times the value of its bitcoins.
Shares of the trust closed at a 67% premium to their bitcoin holdings on Wednesday, implying that the same bitcoin you could buy on an online exchange for roughly $11,000 was worth more than $18,240 when held in the form of GBTC shares. It's a mind-boggling disconnect, but nothing about bitcoin really surprises me anymore.
