Web3: Goldman Sachs Plans $2.25 Billion Acquisition of NEOS to Enter Bitcoin Income ETF Market

CoinWorld reports:

Goldman Sachs is accelerating its entry into the Bitcoin income ETF market through acquisitions. The company disclosed that it has agreed to acquire NEOS Investments for a total consideration of up to $2.25 billion, payable in cash and equity, with the deal expected to close in the first quarter of 2027, subject to regulatory approval and performance conditions.

BTCI Joins Goldman Sachs' ETF Portfolio

NEOS is the manager of BTCI. This product has a size of approximately $1.1 billion and is set to launch in October 2024, having surpassed $1 billion in assets in less than two years. BTCI does not hold Bitcoin directly but instead holds a spot Bitcoin ETP and generates income by selling call options, providing monthly distributions to investors.

The characteristic of such products is to exchange income for some upside potential. Public information shows that BTCI currently has an expense ratio of 0.99%, with a return decline of about 43% over the past year, but the product claims a yield of approximately 27%.

Goldman Sachs Expands Options-Based ETF Business

The company disclosed that upon completion of the acquisition, Goldman Sachs will gain an options-based ETF platform consisting of 19 funds under NEOS, corresponding to an asset size of approximately $30 billion. If combined with Goldman Sachs' existing related ETF assets of about $40 billion, along with the previously announced Innovator Capital Management deal, the total ETF assets managed or overseen by Goldman Sachs will exceed $130 billion.

According to Goldman Sachs, this scale is sufficient to place it among the top global active ETF management firms. Data from Morningstar indicates that the entire industry scale of derivative income ETFs has increased to approximately $180 billion, with a compound annual growth rate exceeding 70% since 2021.

• Transaction Valuation: Up to $2.25 billion
• BTCI Size: Approximately $1.1 billion
• Goldman Sachs ETF Assets: Will exceed $130 billion post-transaction

Direct Competition with BlackRock's Similar Products

This transaction also allows Goldman Sachs to directly acquire an existing product in the Bitcoin income ETF space, without having to launch a similar fund from scratch. Previously, on April 14, Goldman Sachs registered the Goldman Sachs Bitcoin Premium Income ETF with the U.S. SEC, which has a structure similar to BTCI, both employing a covered call option strategy.

Bloomberg ETF analyst Eric Balchunas believes that this acquisition explains why Goldman Sachs has been slow to advance its own Bitcoin income ETF listing. Compared to launching a product from scratch, directly purchasing an existing management platform allows for a quicker market entry and competition with BlackRock's BITA launched in June this year.

BlackRock's BITA was listed on Nasdaq on June 16, targeting an annualized yield of 15% to 25%, and sells call options on part of its IBIT holdings, with an expense ratio of 0.65%. In contrast, BTCI has a higher expense but has already accumulated a certain asset size and market record.

Additional Information: NEOS co-founders Troy Cates and Garrett Paolella will join Goldman Sachs as partners after the transaction is completed.