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Ether Capital Aims To Convert Into A Staking Ether ETF

Share prices of Ether Capital are up ~30% on the news.

Author

Luke Ostapchuk
May 02, 2024 • Estimated Reading Time: 3 minutes

Today, Ether Capital Corporation (ETHC) announced it has entered into a framework agreement to convert the company into a Staking Ether ETF through a deal with Purpose Investments.

Purpose Investments, a Canadian asset manager with over C$19 billion in assets under management (AUM), will pay Ether Capital $1.5 million in cash for its non-Ether assets and the right to manage the fund going forward.

Notably, Purpose is no stranger to Ether Capital, having supported its initial launch in 2018, nor the business of ETFs. The firm is already home to the Purpose Bitcoin ETF (BTCC) and the Purpose Ether ETF (ETHH).

Share prices of Ether Capital are up ~30% on the news.

Why the Change?

Both companies believe this structure offers several benefits:

  • Reduced Discount: At the time of the announcement, shares of Ether Cap were trading at a ~36% discount to its Net Asset Value (NAV). The ETF conversion would immediately reduce the current discount, and unlock short-term value, making the investment more attractive.

  • Improved Liquidity: Given that bid and ask prices will be more in line with the NAV, executives expect the move to increase liquidity. For well over a year, Ether Cap trading has been limited and has struggled to boost investor activity and interest from brokers.

  • Continued Staking Rewards: The ETF plans to stake a significant portion of its Ether holdings, allowing investors to benefit from staking rewards.

“We believe this is a compelling transaction that substantially unlocks near-term value and liquidity for the Shareholders, while providing a clear path to efficient long-term participation in Ether and staking opportunities under Purpose’s stewardship.”

Vlad Tasevski, Head of Asset Management at Purpose Investments

About Ether Capital

Founded in 2018, Ether Capital holds a large amount of Ether and generates revenue simply through staking.

At the time of writing the firm holds ~46,317 ETH on its balance sheet, 98% of which is staked. In 2023, reported revenue came in at $5.2 million, with $4.5 million coming from staking alone.

Here at CoinSnacks, we’ve written extensively about Ether Cap in past reports and our weekly newsletter because we thought it was a solid “backdoor” way to gain exposure to Ethereum, at a discount, through the public markets.

Share prices did explode higher in the last cycle but, like most “crypto stocks” at the time, fell sharply in the last bear market.

As time went on, and as more public vehicles entered the fray, it seemed Ether Capital struggled to appeal new investors despite its steep discount and the massive Ethereum (ETH) allocation on its balance sheet.

What's Next?

Ether Capital shareholders will vote on the proposed conversion in June 2024. If approved, the ETF is expected to begin trading on the CBOE and will waive management fees on the ETF shares for the first three months of trading.

While the US has approved Bitcoin ETFs, Ethereum ETFs are not yet available. Canada, on the other hand, has been ahead of the curve, offering both Bitcoin and Ether ETFs since 2021.