Just a few moments ago Michael Sonnenshein was on CNBC discussing a few topics that the company is engaged in and the reaction from the CNBC hosts was interesting, to say the least. He covered many different topics that have recently been affecting the company and more importantly been capturing headlines across the investment space.
When he first came on he was discussing Grayscale's current lawsuit against the SEC over its consistent denial of a Bitcoin Spot ETF and said that in their recent appeals court hearing that he was pretty optimistic about how it went. He credited the team of lawyers that Grayscale has assembled over the years as really being able to relay and poke holes in the SEC's reasoning for the rejection. The key thing he stated was how the SEC was allowing a futures market but not a spot market ETF. Since these rely on the same things and are intertwined Grayscale is arguing that since they have approved multiple futures ETFs they now need to allow these spot ETFs. In Mr. Sonnenshein's opinion, it seems that the court was appearing to agrees with that reasoning.
What was covered next was the recent lawsuit brought against Grayscale by FTX debtors. This lawsuit is honestly not going to have any winners and brings up an issue that has been a thorn in Grayscale's side. Their high fees. FTX debtors have filed a lawsuit against Grayscale to finally force Grayscale to let FTX redeem their shares something that Grayscale has prevented a ton of people from being able to do but also against the fees that the company has already paid. Over the last two years with just FTX Grayscale has charged over $1.3 billion in management fees which the debtors are trying to recoup. Overall this lawsuit is seeking to unlock $9 billion or more in value for FTX.
As I previously mentioned fees have been a recurring issue for Grayscale and while they have reduced them in the past they are still extremely high in today's market. For products like Grayscale offers fees are going to be much higher than say SPYD (the S&P 500 high dividend ETF) and examples like Kathy Woods Ark Investments show that people will invest still understanding it is a more risky asset. However, a 2% annual fee is something else especially when you cannot redeem your shares for Bitcoin. When this was highlighted Mr. Sonnenshein noted the extremely high cost that it takes to run the Trust and company, especially with the lawsuits and repeated filings that the company has to do which to a point I do understand but it is a double-edged sword. Until the lawsuits die down I do not see that cost shrinking which means I am not sure that they will be able to lower fees all that much. Grayscale has assembled good lawyers but that also means that they are spending a buttload of money on that endeavor and with Digital Currency Group already having all the money issues they are lower fees from that angel would be a hard pill to swallow. When pressed about the fees Mr. Sonnenshein did not back down and defended the fee price further making me believe that the 2% fee is going to stick around unless something dramatically changes and quickly.
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