Tuesday, July 02, 2013

Bitcoin Going Public with IPO

It had to happen eventually. Do you remember the Winklevoss twins? They were the ones that claimed rights to Facebook (FB)? They have files a Form S-1 with the SEC for an IPO called the WINKLEVOSS BITCOIN TRUST.

According to the SEC filing:

The Winklevoss Bitcoin Trust (Trust) will issue Winklevoss Bitcoin Shares (Shares) which represent units of fractional undivided beneficial interest in and ownership of the Trust. Math-Based Asset Services LLC is the sponsor of the Trust (Sponsor) and [TRUSTEE] is the trustee and custodian of the Trust (Trustee) using proprietary and patent-pending technology to administer the Trust. The Trust intends to issue additional Shares on a continuous basis. 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.

Trust Structure
The Trust is a common law trust, formed on [ ], 2013 under New York law pursuant to the Trust Agreement between the Sponsor and the Trustee (“Trust Agreement”), which sets forth the respective rights and duties of the Sponsor and the Trustee and establishes the segregated custody account of the Trust that will be used to hold the Bitcoins deposited with the Trust (“Trust Custody Account”). The Trust holds “Bitcoins,” a digital commodity based on an open source cryptographic protocol existing on the online, end-user-to-end-user network hosting the public transaction ledger, known as the “Blockchain,” and the source code comprising the basis for the cryptographic and algorithmic protocols governing the issuance of and transactions in Bitcoins (the “Bitcoin Network”). The Trust is expected from time to time to issue Baskets in exchange for deposits of Bitcoins and to distribute Bitcoins in connection with redemptions of Baskets. The investment objective of the Trust is for the Shares to reflect the performance of a weighted average price of Bitcoins (“Blended Bitcoin Price”), less the Trust’s expenses. The Sponsor believes that, for many investors, the Shares will represent a cost-effective and convenient means to access exposure to Bitcoins. The material terms of the Trust Agreement are discussed in greater detail under the section “Description of the Trust Agreement.” The Shares represent units of fractional undivided beneficial interest in and ownership of the Trust and are expected to be traded under the ticker symbol “[TICKER]” on the [EXCHANGE].
The Trust’s Sponsor is Math-Based Asset Services LLC. The Sponsor is a Delaware limited liability company formed on May 9, 2013, and is wholly-owned by Winklevoss Capital Management LLC. Under the Delaware Limited Liability Company Act and the governing documents of the Sponsor, Winklevoss Capital Management LLC, the sole member of the Sponsor, is not responsible for the debts, obligations and liabilities of the Sponsor solely by reason of being the sole member of the Sponsor. The Sponsor will be the exclusive licensee of certain patent-pending intellectual property regarding the operation of the Trust and the Trust’s hardware and software security system (“Security System”). Winklevoss IP LLC is the owner of and is licensing to the Sponsor such intellectual property.
The Sponsor will arrange for the creation of the Trust, the registration of the Shares for their public offering in the United States and the listing of the Shares on the [EXCHANGE]. The Sponsor has agreed to assume the following administrative and marketing expenses incurred by the Trust: the Trustee’s monthly fee and expenses reimbursable under the Trust Agreement, Exchange listing fees, US Securities and Exchange Commission (“SEC”) registration fees, printing and mailing costs, audit fees and up to $[100,000] per annum in legal expenses. The Sponsor will also pay the costs of the Trust’s organization and the initial sale of the Shares, including the applicable SEC registration fees.
The Trustee is [TRUSTEE]. In its capacity as trustee of the Trust, the Trustee is generally responsible for the day-to-day administration of the Trust. This includes (1) transferring the Trust’s Bitcoins as needed to pay the remuneration due to the Sponsor (“Sponsor’s Fee”) in Bitcoins (such Bitcoins transfers are expected to occur approximately monthly in the ordinary course), (2) calculating the NAV of the Trust and the NAV per Share, (3) receiving and processing orders from Authorized Participants to create and redeem Baskets and coordinating the processing of such orders with The Depository Trust Company (“DTC”), (4) transferring the Trust’s Bitcoins as needed to pay any extraordinary Trust expenses that are not assumed by the Sponsor and (5) selling the Trust’s remaining Bitcoins at termination of the Trust and distributing the cash proceeds to the owners of beneficial interests in the Shares (“Shareholders”) of record.

The entire SEC filing can be found here.

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