10-Q: Grayscale Stellar Lumens Trust (XLM) Reports Increase in Net Assets for Q2 2024

Grayscale Stellar Lumens Trust (XLM) saw an increase in net assets during the quarter ended March 31, 2024, driven by XLM price appreciation and share creations.

Summary

• Grayscale Stellar Lumens Trust (XLM) filed its Form 10-Q for the quarter ended March 31, 2024.
• The Trust's investment objective is to reflect the value of XLM held by the Trust, less expenses.
• As of March 31, 2024, the Trust's net assets were $11.592 million, compared to $8.236 million as of September 30, 2023.
• The increase in net assets was primarily due to XLM price appreciation and share creations.
• The Trust's shares are traded on the OTCQX under the symbol GXLM.
• The Sponsor's Fee is calculated as 2.5% of the aggregate value of the Trust's assets.
• The Trust is not currently operating a redemption program.
• The Trust held 82,486,220.0797273 XLM as of March 31, 2024, valued at $0.14 per XLM.
• There were 942,200 shares outstanding as of March 31, 2024.
• The Principal Market NAV per Share was $12.30 as of March 31, 2024.
• The Trust is subject to various risks, including market risk and liquidity risk.
• The Trust has not had a cash balance at any time since inception.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the increase in net assets and NAV per share, but tempered by the risks associated with cryptocurrency investments and the lack of a redemption program.

Positives

• The Trust experienced an increase in net assets due to XLM price appreciation and share creations.
• The Principal Market NAV per Share increased, reflecting the increased value of XLM.
• The Trust continues to issue shares, indicating investor demand.
• The Trust's disclosure controls and procedures were deemed effective as of the end of the period covered by the report.

Negatives

• The Trust is not currently operating a redemption program, limiting investor liquidity.
• The Trust's shares have traded at both premiums and discounts to the value of XLM held by the Trust.
• The Trust has no cash balance at any time since inception.
• The Trust is subject to market risk and liquidity risk.

Risks

• The Trust is subject to market risk due to fluctuations in the price of XLM.
• The Trust is subject to liquidity risk due to the lack of a redemption program.
• The Trust's assets could be lost or stolen.
• The SEC could determine that XLM is a security, which could have material adverse consequences.
• The Trust relies on third-party service providers, and disruptions to their business operations could have an adverse impact.
• The Sponsor and the Trust may be subject to various litigation, regulatory investigations, and other legal proceedings.

Future Outlook

Subject to receipt of regulatory approval and approval by the Sponsor in its sole discretion, the Trust may in the future operate a redemption program; however, the Trust currently has no intention of seeking regulatory approval to operate an ongoing redemption program.

Industry Context

The report provides insight into the performance of a single-asset cryptocurrency trust, reflecting the volatility and potential for growth in the digital asset market.

Comparison to Industry Standards

• Grayscale offers similar trusts for other cryptocurrencies like Bitcoin (GBTC) and Ethereum (ETHE).
• The performance of GXLM can be compared to these other Grayscale trusts and to spot XLM prices.
• Unlike spot XLM, GXLM trades on OTCQX, which may result in premiums or discounts to NAV.

Legal Proceedings

• Osprey Funds, LLC filed a suit against the Sponsor alleging violations of the Connecticut Unfair Trade Practices Act; the Sponsor intends to vigorously defend against it.
• Alameda Research, Ltd. filed a suit against the Sponsor, DCG, Michael Sonnenshein and Barry Silbert alleging various breach of contract and fiduciary duty claims, but Alameda voluntarily dismissed the action without prejudice.

Related Party Transactions

• The Trust pays a Sponsor's Fee to Grayscale Investments, LLC, a related party.
• As of March 31, 2024 and September 30, 2023, 98,455 and 110,393 Shares of the Trust were held by related parties of the Trust, respectively.
• The Sponsors parent, an affiliate of the Trust, holds a minority interest in Coinbase, Inc., the parent company of the Custodian, that represents less than 1.0 % of Coinbase, Inc.s ownership.

Stakeholder Impact

• Shareholders benefit from the increase in net asset value.
• The Sponsor receives fees for managing the Trust.
• The Custodian safeguards the Trust's XLM holdings.
• Authorized Participants facilitate the creation of shares.

Key Dates

Keywords

Grayscale Stellar Lumens Trust, XLM, Stellar Lumens, Digital Currency, Cryptocurrency, Trust, Financial Report, Net Assets, Shares, OTCQX