Ether Capital Announces Conclusion of its Strategic Review and Enters into an Agreement with Purpose Unlimited to Convert into a Staking Ether ETF

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.

TORONTO–(BUSINESS WIRE)–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 30^th, 2024, and the Corporation’s net equity value per share as of April 30^th, 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.

Contacts

Jillian Friedman

Chief Operating Officer & Interim Chief Financial Officer

[email protected]

Vlad Tasevski

Head of Asset Management

[email protected]