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Winklevoss twins file for $20 Million IPO of bitcoin trust fund

Jul 02, 2013

The Winklevoss twins have filed with the U.S. Securities and Exchange Commission (SEC), for an investment fund based upon their substantial holding of bitcoin. The Winklevoss Bitcoin Trust is sponsored by a company the pair created called Math-Based Asset Services LLC. The Winklevii (as they are known) hope to expose more investors to the potential gains (and losses) of bitcoin.

The S-1 form can be read in full here. The Winklevii told the New York Times in April that they had a portfolio of (at the time of writing) $11 million worth of bitcoin. That holding reportedly represents 1% of all bitcoin in circulation.

Given the volatility and regulatory uncertainty surrounding bitcoin, it is understandable that many traditional investors have held back from taking a position on bitcoin. However, the Winklevii state in the SEC filing that:

The investment objective of the Trust is for the Shares to reflect the performance of the Blended Bitcoin Price of Bitcoins, less the expenses of the Trust’s operations. The Shares are designed for investors seeking a cost-effective and convenient means to gain exposure to Bitcoins with minimal credit risk.

Therefore, the Winklevoss proposition may serve to tempt in more mainstream and conservative investors to put their money into bitcoin. Helping bitcoin to gain acceptance is just what the Winklevoss twins seem to be working on. At the Bitcoin 2013 conference, they called for bitcoin businesses to work with their governments and stated that cooperation was the way forward.

The SEC filing goes on to explain that shares are purchased in blocks of 50,000 – known as "Baskets", that will be indivisible.

The Shares may be purchased from the Trust only in one or more blocks of [50,000] Shares (a block of [50,000] Shares is called a Basket). The Trust will issue Shares in Baskets to certain authorized participants (Authorized Participants) on an ongoing basis as described in “Plan of Distribution.” Baskets will be offered continuously at the net asset value (NAV) for [50,000] Shares on the day that an order to create a Basket is accepted by the Trustee. The Trust will not issue fractions of a Basket.

Furthermore,

The Trust will issue Shares from time to time in Baskets, as described in “Creation and Redemption of Shares.” It is expected that the Shares will be sold to the public at varying prices to be determined by reference to, among other considerations, the price of the Bitcoins represented by each Share and the trading price of the Shares on the [EXCHANGE] at the time of each sale.

Later in the filing, the "Plan of distribution" explains that it allows "authorized participants" to receive Baskets in exchange for bitcoin on a continuous basis. The trust states that it will not issue fractions of Baskets as shares will be created on an ongoing basis. However, such authorized participants are free to sell any fraction of shares to their clients.

For example, a broker-dealer firm or its client will be deemed a statutory underwriter if it purchases a Basket from the Trust, breaks the Basket down into its constituent Shares and sells the Shares directly to its customers, or if it chooses to couple the creation of a new Basket with an active selling effort involving solicitation of secondary market demand for the Shares.

The filing also cautioned that it was not directly responsible fo the development of the Bitcoin network, and that "the sponsor and its management have no history of operating an investment vehicle like the Trust, their experience may be inadequate or unsuitable to manage the Trust".

We will update this story with more information as we receive it.

DISCLOSURE

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David Gilson

Winklevoss twins file for $20 Million IPO of bitcoin trust fund

Winklevoss twins file for $20 Million IPO of bitcoin trust fund

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