The world’s largest asset manager, BlackRock, received $100,000 in seed funding from an unknown investor for its spot Bitcoin (BTC) exchange-traded fund (ETF) in October 2023, according to its latest United States Securities and Exchange Commission (SEC) filing.
The SEC filing revealed that the investor agreed to purchase 4,000 shares for $100,000 on Oct. 27, 2023, at $25.00 per share, with the investor “acting as a statutory underwriter with respect to the Seed Creation Baskets.”
The latest filing by BlackRock also revealed certain details on the asset manager’s plans to pay the sponsor’s fee, where it plans to borrow Bitcoin or cash as trade credit from the trade credit lender on a short-term basis. BlackRock can “charge their fees” via a loan instead of having to sell BTC (the ETF asset). That way, they “don’t impact BTC price that much.”
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The settlement of trade credits will occur on the business day following the execution date, attracting a financing fee of 11% plus the federal funds target rate divided by 365 ((11% + fed funds target)/365). For example, suppose on Nov. 20, 2023, the fed funds target rate was 5.50%, the hypothetical financing fee as of that date would be 11%+ 5.5% divided by 365 on the borrowed funds.
ETF analyst Eric Balchunas called the new revelations an interesting development in the nerdiest way.
This is so interesting in the nerdiest way.
— James Seyffart (@JSeyff) December 5, 2023
BlackRock was among the first institutional giants in 2023 to propose and file for a spot Bitcoin ETF earlier in July this year. BlackRock’s filing prompted more than a dozen other institutional giants to file for spot BTC ETF. While the SEC had rejected most of the earlier filed spot BTC ETF before BlackRock entered the spot ETF race in 2023, market experts have predicted that by early 2024, the SEC will most likely approve the first spot BTC ETF in the United States.
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