Invest3 publishers2 min readPublished
Grayscale splits its Zcash ETF three ways five weeks after listing it
Grayscale will cut ZCSH's NAV per share to a third on Sept. 30. The coin behind the fund went from about $42 a year ago to an intraday $1,521 on Friday, and by one analysis $100 million of the fund's inflow came from a unit of its parent.
The Investor · Invest desk
What happened
- Grayscale will run a 3-for-1 forward split of its Zcash ETF, with holders of record at the Sept. 28 close getting two extra shares each, paid after the Sept. 29 close and trading split-adjusted from Sept. 30.
- More than $233 million has gone into ZCSH since it began trading on Aug. 25, including a single $112 million day on Sept. 8 and $46.6 million on one day this week.
- ZCSH, the first spot exchange-traded fund to hold ZEC directly, had net assets of about $890 million as of Sept. 17 after listing on NYSE Arca.
- ZEC traded at about $42 a year ago, crossed $1,000 on Sept. 4, and printed an intraday high of $1,521 on Friday, which The Block called a new effective all-time high.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- cost Holders pay a 2.5% annual fee, roughly ten times a spot bitcoin ETF's rate, which on about $890 million of net assets collects near $22 million a year; tripling the share count changes none of that.
- capability Cutting NAV per share to a third brings the fund within reach of brokerage accounts that can only buy whole shares, the buyers Decrypt says splits exist for, since a broker will not sell a fraction of a stock.
- exposure Buyers of a privacy-coin fund get holdings that Liu says sit only in transparent Coinbase wallets, so the fund's own coins can be inspected by anyone on the public blockchain.
- precedent Grayscale has re-cut a crypto vehicle on this logic before, taking the Ethereum Trust 9-for-1 in December 2020, so issuers now have a template for resizing single-asset crypto shares whenever the coin runs.
A forward split is division, and the filing says so: "Immediately following the Forward Split, the NAV per Share is expected to be approximately one-third of the NAV per Share immediately before the Forward Split," Grayscale wrote [6]. The ticker and the CUSIP stay as they are [7]. Grayscale's own illustration has 10 shares worth $300 each becoming 30 worth $100 each, $3,000 before and after [8].
So the share got expensive. Whether the fund got popular is a separate question, and the accounts of where the money came from do not line up. Austin Liu, in a Sept. 17 Medium analysis cited by Cryptopolitan, wrote that much of the fund's total was money already sitting in the trust before the conversion [14]. He put fresh outside inflows at roughly $70 million [14]. A further $100 million came from DCG International Investments, a unit of Grayscale's parent Digital Currency Group [14]. Set that $100 million against the $233 million Decrypt counts since launch and one affiliate supplied about 43% of it [3][1].
The two accounts also differ on how big the fund was on its first day. Decrypt reports the old trust held roughly $313 million in ZEC by the time it began trading [11]; Cryptopolitan puts the listing size at about $260 million [13]. Net assets were about $890 million on Sept. 17 [4]. Take the larger starting figure and the fund grew by $577 million, of which $233 million arrived as subscriptions and about $344 million came from ZEC's move [2]. Start from $260 million and the price contribution is $397 million [3]. The more than 550,000 ZEC the fund held in early September, close to 3% of the coin's supply, would be worth about $837 million at Friday's high [15][4].
I think this split is housekeeping on a share price that a 36-fold year in the coin made awkward [6]. The case for durable outside demand is thin while a $100 million ticket from a unit of Grayscale's parent sits inside the inflow total [14]. Two things would change that. If October's daily flows run at the $46.6 million ZCSH took in on one day this week, with no further affiliate allocation, the demand case holds and I am wrong [3]. If ZEC gives back a large part of a year Decrypt measures at more than 2,800%, the fund shrinks on price with three times as many shares outstanding [10].
What to watch
- Whether ZCSH's daily flows after Sept. 30 hold near the $46.6 million seen this week without another allocation from a Grayscale or DCG affiliate.
- Whether the 2.5% annual fee survives as assets grow, or as rival spot Zcash products seek listings.
- Whether the fund's ZEC holdings push past 3% of the 21 million coin supply, and whether they stay in transparent wallets.