Grayscale Investments, a crypto asset management firm, has revealed the record date for the first issuance and distribution of shares of its new Grayscale Ethereum Mini Trust. This move is set to happen on the 18th of July, 2024 and will add to the firm’s list of crypto investment products with existing shareholders expected to be affected.

Grayscale Investments has announced July 18, 2024, as the record date for the initial creation and distribution of shares of the Grayscale Ethereum Mini Trust (ETH Trust) to shareholders of Grayscale Ethereum Trust (ETHE). This Initial Distribution will entitle each ETHE shareholder to receive shares of the ETH Trust in proportion to their ETHE holdings.

In particular, ETHE will transfer 10% of its Ether holdings to the ETH Trust, and each ETHE share held at 4:00 PM ET on the Record Date will be exchanged for one ETH Share.

The ETH Trust, which is sponsored by Grayscale and is a Delaware statutory trust, seeks to be listed on the NYSE Arca under the ticker symbol “ETH” subject to regulatory approval. This is in line with Grayscale’s current approach to expanding the available rates of crypto investment products and to increase the value for shareholders.

Mechanism and Conditions

According to the preliminary information statement on Schedule 14C filed with the Securities and Exchange Commission (SEC), the Initial Distribution does not require payment or action from ETHE shareholders. Once the distribution conditions are met, each ETHE shareholder will automatically receive ETH Shares in their portfolios or investment accounts.

The Distribution Date will happen after meeting certain events such as the effectiveness of the registration statement of ETH Trust on Form 8-A and Form S-1 and the approval of NYSE Arca for the listing of the ETH Shares. 

Subsequently, the earliest possible Distribution Date is fixed as the 19th day of July. However, due to the legal and procedural factors, Grayscale noted that there is no assurance that the initial distribution will take place as projected.

Grayscale Filing for the Grayscale Ethereum Mini Trust

This development comes in the wake of a number of strategic actions that Grayscale has been undertaking to grow its product line as well as respond to the changing legal environment. 

In April, Grayscale applied for the establishment of the Grayscale Ethereum Mini Trust which will be funded initially by the assets of the Grayscale Ethereum Trust. This will be aimed at long-term investors and will charge lower fees when compared to the original ETHE.

Grayscale has been already pursuing the licenses for its crypto investment products. In the last few months, the firm submitted an amendment to the 19b-4 filing for the Ethereum Mini Trust, which is significant for the launch of the spot Ethereum ETF. This push is in response to the overall market initiative to secure the approval for spot cryptocurrency ETFs due to the increasing interest in digital asset investment vehicles.

Implications for ETHE Shareholders

The creation of the ETH Trust represents a significant development for ETHE shareholders. As of July 18, 2024, ETHE shares will trade without the right to receive ETH Shares, marking an “Ex-Distribution Date.”

Following the initial distribution, shareholders will automatically see both ETHE Shares and ETH Shares in their investment accounts.

Grayscale’s announcement indicates that the Initial Distribution is expected to be tax-neutral for U.S. federal income tax purposes. However, neither the contribution of Ether to the ETH Trust nor the distribution of ETH Shares is anticipated to result in taxable income, gain, loss, deduction, credit, or proceeds for ETHE shareholders.

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