Key Highlights
- Ether Capital Corporation (“Ether Capital” or the
“Corporation”) has entered into a framework agreement with
Purpose Unlimited Inc. (“Purpose Unlimited”) and Purpose
Investments Inc. (“Purpose Investments”, and together,
“Purpose”) to convert itself into an exchange-traded fund
(the “Fund”) to be managed by Purpose Investments Inc.
- Purpose will pay Ether Capital $1.5 million in cash for its
non-Ether assets and the right to manage the Fund. Ether Capital
will retain all its Ether assets, which would form the Fund’s
portfolio.
- Purpose has agreed to waive management fees on the ETF Shares
for the first three months following the completion of the ETF
conversion.
- The transaction, which is subject to approval by Ether Capital
shareholders (the “Shareholders”), provides for, among other
things, the amendment of the Corporation’s Articles to re-designate
its common shares as non-voting, redeemable, participating ETF
shares (“ETF Shares”) and re-name the Corporation to Purpose
Ether Staking Corp ETF.
- The Corporation expects that, following the conversion, like
most ETFs, the ETF Shares will trade at a market price that should
closely approximate net asset value per share. Currently, the
Corporation’s common shares trade at a discount to net equity value
per share of approximately 36% at the close of trading on April 30,
2024 (based on unaudited financial information). The ETF conversion
is expected to reduce the current discount between the market price
of the Corporation’s shares and the value of its net assets.
- Purpose expects to stake a material portion of the Fund’s Ether
portfolio to generate staking rewards for the Fund and will seek to
leverage the proprietary staking infrastructure developed by the
Corporation as a means of managing its current staking
activities.
- The board of directors of Ether Capital (the “Board”)
(with interested directors abstaining from voting) has unanimously,
on the recommendation of an independent committee of directors (the
“Independent Committee) approved the transaction and
recommends that the Shareholders approve the transaction, which
marks the end of the Corporation’s strategic review announced on
December 11, 2023.
Ether Capital Corporation (Cboe CA: ETHC) today announces the
results of its strategic review. The Corporation has entered into a
framework agreement (the “Framework Agreement”) with Purpose
Unlimited Inc. and Purpose Investments Inc. (together,
“Purpose”), pursuant to which (i) the Corporation would
convert into an exchange traded fund (the “Fund”) structured
as a mutual fund corporation that would be managed by Purpose
Investments Inc. and (ii) in furtherance of the ETF conversion,
Purpose would purchase certain non-Ether assets of the Corporation
(the “Transaction”). The Corporation would retain its Ether,
cash and cash equivalents, which would become portfolio assets of
the Fund.
Ether Capital was founded to be an access point in the public
markets for participation in the development of Ethereum and its
ecosystem on a safe and secure basis. The Corporation holds
approximately 46,317 Ether, approximately 98% of which is staked,
with the majority on its proprietary internally managed
infrastructure. Reported revenue was $5.2 million for 2023,
including $4.5 million from staking revenue. After considering
various alternatives during its strategic review, including
continuing under its existing corporate structure and focusing on
maximizing its staking strategy, the Independent Committee and the
Board concluded that converting into an ETF is the most
advantageous strategy for the Corporation and its Shareholders.
Key benefits of the ETF conversion are:
1. Most Likely to Close the Market Price
Discount to Net Equity Value. It is expected that the ETF
Shares would trade at or close to the net asset value
(“NAV”) of the Fund’s underlying assets, supported by the
redemption rights attached to the ETF Shares and the continuous
distribution and creation structure of ETF Shares, whereas
historically the common shares have traded at a discount to the
Corporation’s net equity value.
2. Most Likely to Improve Liquidity of the
Common Shares. Trading in the Corporation’s common shares has
been limited, affecting liquidity for Shareholders. It is
anticipated that the ETF structure will improve liquidity because
designated brokers will post bid and ask prices that are in line
with the net asset value per share of the ETF Shares allowing
investors to more efficiently buy or sell shares.
3. Continued Benefit from Staking.
Subject to receipt of necessary regulatory approvals, it is
expected that the Fund will stake a material portion of its Ether
portfolio, and Purpose Investments will seek to leverage the
proprietary staking infrastructure developed by the Corporation as
a means of managing its current staking activities.
Given its extensive experience as a leading independent asset
manager with approximately 100 investment funds and strategies, its
investment fund structuring expertise, and experienced leadership
team managing over C$19 billion of AUM, Ether Capital believes that
Purpose is well qualified to manage the Fund with a view to
preserving and increasing shareholder value. It is worth noting
that Purpose was a core partner in the founding and development of
Ether Capital in 2018. In addition, in 2021, Purpose saw an
opportunity to broaden every investor’s access to spot bitcoin and
spot ether exposure in a safe and secure way by launching novel
digital asset ETFs, including the Purpose Bitcoin ETF (TSX: BTCC),
the world’s first physically settled Bitcoin ETF, and the Purpose
Ether ETF (TSX: ETHH), the world’s first physically settled Ether
ETF.
“After significant analysis and thoroughly exploring various
paths for the entity, we believe that conversion to an ETF is the
path that most closely achieves the goals of the strategic review
and will align the market price of the shares with the intrinsic
value of the balance sheet assets, while ensuring access to
innovative technology, better tax treatment, all within a
supportive regulatory framework”, said Boris Wertz, Lead
Independent Director of Ether Capital.
“With our existing, long-standing relationship, we chose Purpose
because of their proven ability to deliver a best-in-class
financial product. We have confidence that Purpose is the right
partner to unlock access to Ether and staking yield in an ETF
product within a timeline that meets our shareholders’
expectations”, said Jillian Friedman, Interim CFO and COO.
Vlad Tasevski, Head of Asset Management at Purpose Investments,
stated “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.”
Transaction Highlights
The Fund would invest in and hold substantially all of its
assets in long-term holdings of Ether in order to provide its
shareholders with a secure, convenient, lower-cost alternative to a
direct investment in Ether. Purpose Investments, as manager of the
Fund, intends to establish a program to stake a material portion of
the Fund’s Ether through one or more staking service providers. As
a result of any staking activity in which the Fund would engage,
the Fund would expect to receive staking rewards of Ether.
Currently, the Corporation’s common shares trade at a discount
to net equity value per share of approximately 36% based on the
trading price of the common shares at the close of trading on April
30th, 2024, and the Corporation’s net equity value per share as of
April 30th, 2024, noting that this financial information is
unaudited. The ETF conversion is expected to reduce the current
discount between the market price of the Corporation’s shares and
the value of its net assets. Once the ETF Shares start trading, it
is expected that designated brokers will make a market in the ETF
Shares with prices generally in line with NAV per ETF Share.
Purpose Investments has agreed to waive management fees on the
ETF Shares for the first three months following the completion of
the ETF conversion.
The Independent Committee, comprised of independent directors
Boris Wertz (Chair), Colleen McMorrow and Liam Horne was formed to
oversee any real or potential conflict of interests as part of the
strategic review, including the proposed transaction with Purpose
Investments Inc. and Purpose Unlimited Inc., which are “related
parties” of Ether Capital within the meaning of Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions (“MI 61-101”).
Further Transaction Details
The Transaction is subject to the approval of Shareholders
including: (i) the approval of at least two-thirds of votes cast at
a meeting of the Corporation (the “Meeting”) and (ii) the
approval a simple majority of the votes cast by Shareholders
excluding certain interested Shareholders as required by MI 61-101.
The Corporation expects to hold the Meeting on June 10, 2024. In
addition, the Transaction is subject to certain closing conditions,
including a receipt from the Ontario Securities Commission for a
final simplified prospectus and approval from Cboe Canada, and
other customary closing conditions. If Shareholder approval is
obtained and all other closing conditions are satisfied or waived,
the Transaction is expected to close on or around June 17, 2024.
Completion of the Transaction is not subject to any financing
condition.
The Agreement provides for a non-solicitation covenant on the
part of Ether Capital, which is subject to customary “fiduciary
out” provisions that enable Ether Capital to terminate the
Agreement and accept an alternative proposal in certain
circumstances, subject to a “right to match” for Purpose. A
termination fee of $1 million would be payable by Ether Capital if
it accepts an alternative proposal.
In connection with the Transaction, each director and senior
officer of the Corporation, holding in aggregate approximately
7.25% of the issued and outstanding common shares of the
Corporation, has agreed to enter into a customary voting and
support agreement pursuant to which, among other things, they have
agreed to vote all of its common shares in favour of the
Transaction. Purpose, holding approximately 3.5% of the issued and
outstanding common shares of the Corporation, has also agreed to
vote all of their common shares in favour of the Transaction.
Following completion of the Transaction, the issued and
outstanding common shares will be re-designated as ETF Shares of
the Fund. Shareholders will not be required to sell their common
shares and the ETF conversion should not trigger a taxable event
for Shareholders who hold onto the ETF Shares following the
completion of the Transaction.
McCarthy Tétrault LLP is acting as legal counsel to Ether
Capital and Osler, Hoskin & Harcourt LLP is acting as legal
counsel to Purpose in respect of the Transaction.
The Transaction is governed by the Framework Agreement between
the Corporation and Purpose, which will be filed by Ether Capital
on SEDAR+ and will be available for viewing under Ether Capital’s
profile at www.sedarplus.com.
Independent Committee and Voting Recommendation
The Framework Agreement was the result of a comprehensive
negotiation process with Purpose under the supervision of the
Independent Committee and excluding Som Seif and Camillo di Prata,
who are each directors of Ether Capital and Purpose Unlimited, and
in the case of Mr. Seif, the interim Chief Executive Officer of
Ether Capital and the Chief Executive Officer, and a significant
shareholder of Purpose Unlimited.
After receiving the unanimous recommendation of the Independent
Committee, the Board unanimously (with Mr. Seif and Mr. di Prata
abstaining from voting) determined that the Transaction is in the
best interest of the Corporation and is fair to Shareholders and
recommends that Shareholders vote in favour of the Transaction.
Additional details regarding the terms and conditions of the
Transaction, the rationale for the recommendation made by the
Independent Committee and the Board and key terms of the Fund and
the ETF Shares will be set out in the management information
circular to be mailed to Shareholders in connection with the
Meeting and filed by the Corporation on its profile on SEDAR+ at
www.sedarplus.ca. The preliminary prospectus of the Fund
will also be available on SEDAR+.
About Ether Capital Corporation
The Corporation’s mission is to be the premier access point in
the public markets for investment in Ethereum’s native token,
Ether. The Corporation generates yield on its Ether treasury
through staking, a process that allows Ether holders to participate
in securing the Ethereum network and earn rewards in the form of
additional Ether tokens.
The Corporation’s strategy is to hold and stake Ether, build
intellectual property related to staking and Ethereum
infrastructure in general, and supplement staking income with
consulting and sub-advisory mandates in the digital asset sector.
For more information, please visit http://ethcap.co.
About Purpose
Purpose Unlimited is a leading Canadian fintech firm with an
unrelenting focus on customer-centric innovation delivered through
technology-driven solutions. Led by well-known entrepreneur Som
Seif, Purpose Unlimited seeks to develop a diverse product platform
to address underserved segments of the market, including asset
management, wealth management, SMB financing, and retirement
solutions. For more information, please visit
www.purpose-unlimited.com.
Purpose Investments, the asset management division of Purpose
Unlimited, manages over $19 billion in assets. It is dedicated to
outcome-oriented strategies through traditional, alternative, and
direct-origination capabilities. Purpose Investments is at the
forefront of innovation, making pension-style quality investments
accessible to all investors, big or small, to help every Canadian
realize their goals for meaningful long-term success. For more
information, please visit www.purposeinvest.com.
Forward-Looking Information
This press release contains forward-looking information and
statements within the meaning of applicable securities laws
(collectively “forward-looking information”). Such
forward-looking information, if and when made, may include, without
limitation, statements relating, but not limited, to the
Corporation’s future objectives, business operations, plans or
expectations with respect to business strategies and the
Transaction. Forward-looking information includes all disclosures
regarding possible events, conditions or results of operations that
are based on assumptions about future economic conditions and
courses of action. Forward-looking information may also include,
without limitation, any statement relating to future events,
conditions or circumstances, including the Transaction. More
particularly and without restriction, this press release contains
forward-looking information regarding statements and implications
about the anticipated benefits of the Transaction for the
Corporation and Shareholders, including closing the discount of the
trading price of the common shares to net equity value and improved
liquidity; implementation of the Transaction; Shareholder and Cboe
Canada and other regulatory approvals; the terms of the Fund; the
anticipated timing of the completion of the Transaction; and
expected tax treatment of the Transaction. The Corporation cautions
the reader not to place undue reliance upon any such
forward-looking information, which speak only as of the date they
are made. Often, but not always, forward-looking information can be
identified by the use of words or phrases such as “plans”,
“expects” or “does not expect”, “is expected”, “budget”,
“scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or
“does not anticipate”, “believes”, and similar expressions or
statements that certain actions, events or results “may”, “could”,
“would”, “should”, “might”, or “will” be taken, occur or be
achieved, and may be based on management’s current assumptions and
expectations related to the Transaction and all aspects of the
Corporation’s business, industry and the global economy.
Information contained in forward-looking information is based
upon certain material assumptions that were applied in drawing a
conclusion or making a forecast or projection, including
management’s perceptions of historical trends, current conditions
and expected future developments, as well as other considerations
that are believed to be appropriate in the circumstances. Although
the Corporation believes that the expectations reflected in the
forward-looking information are reasonable, there can be no
assurance that such expectations will prove to be correct and the
Corporation cannot guarantee future results, levels of activity,
performance or achievements.
Forward-looking information is subject to a number of risks and
uncertainties, many of which are beyond the control of the
Corporation, which could cause actual results to differ materially
from those that are disclosed in or implied by such forward-looking
information. These risks and uncertainties include, but are not
limited to, the failure of, or delays in, the Corporation to obtain
any necessary Shareholder or Cboe Canada approvals or failure of
the parties to otherwise satisfy the conditions to the completion
of the Transaction; significant Transaction costs or unknown
liabilities; failure to realize the expected benefits of the
Transaction; general economic conditions; changes in legislation;
risks relating to the Fund; and other risks and uncertainties.
Failure to obtain any necessary Shareholder or Cboe Canada
approvals, or the failure of the parties to otherwise satisfy the
conditions to the completion of the Transaction or to complete the
Transaction, may result in the Transaction not being completed on
the proposed terms, or at all. In addition, if the Transaction is
not completed, there are risks that the announcement of the
Transaction and the dedication of substantial resources of the
Corporation to the completion of the Transaction could have an
impact on its business and strategic relationships (including with
future and prospective employees, customers, suppliers and
partners), operating results and activities in general, and could
have a material adverse effect on its current and future
operations, financial condition and prospects.
Consequently, all of the forward-looking information contained
herein is qualified by the foregoing cautionary statements, and
there can be no guarantee that the results or developments that we
anticipate will be realized or, even if substantially realized,
that they will have the expected consequences or effects on our
business, financial condition or results of operation.
This list is not exhaustive of the factors that may affect any
of the forward-looking information of the Corporation. Additional
information about the risks and uncertainties of the Corporation’s
business and material factors or assumptions on which information
contained in forward-looking information is based is provided in
the Corporation’s Annual Information Form and MD&A for the year
ended December 31, 2023, filed with the securities regulatory
authorities in Canada and available at www.sedarplus.ca.
Other than as specifically required by applicable Canadian law,
forward-looking information speaks only as of the date on which
they are made and the Corporation undertakes no obligation to
publicly update or revise any forward-looking information, whether
as a result of new information, future events, or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240502440170/en/
Jillian Friedman Chief Operating Officer & Interim Chief
Financial Officer jillian@ethcap.co Vlad Tasevski Head of Asset
Management vladt@purposeinvest.com