Canary Capital Files for Pudgy Penguins ETF

Canary Capital Group has filed with the Securities and Exchange Commission for permission to launch a Pudgy Penguins exchange-traded fund (ETF) that will keep up to 15% of its assets in Pudgy Penguins NFTs.

Let’s pause here to point out that anyone can apply for an ETF selling anything, but approval is far from assured.

While 80%-95% of the prospective ETF’s holdings would be in PENGU tokens, 5%- 15% would be in Pudgy Penguin NFTs chosen “by considering factors such as price, relative rarity, perceived desirability of a particular NFTs traits and characteristics, and the overall collection value.”

The most expensive Pudgy Penguin sale to date was No. 6873, with a hair pick, sunglasses and PP medal around its neck, selling for $775,000 in ETH in Sept. 2021. So, presumably, this Pudgy Penguin would be a potential target for the ETF.

As for the main holdings, besides PENGU tokens, the trust may hold SOL and ETH “that are necessary or incidental to the purchase, sale and transfer of the Trust’s PENGU and Pudgy Penguins NFTs.” But it won’t hold those tokens for investment purposes.

PENGU Downtrend

The PENGU token had a controversial launch on Dec. 18, characterized by high volatility. Pudgy Penguins' floor price briefly spiked as high as 29 ETH in the days leading up to the token launch. The current price floor is 9.81 ETH, according to NFTPriceFloor.

As for those PENGU tokens, let’s see what the ETF sponsor has to say about them.

Characterizing PENGU as a “utility token,” Canary Capital goes on to explain that utility tokens usually give holders access to services or features within a blockchain ecosystem or platform.

And while a utility token’s worth is generally based on the provision of some utility, “Pudgy Penguins has not announced any particular use for PENGU or any benefit for PENGU holders other than closer association with members of the Pudgy Penguins community. There is no guarantee any such uses or benefits will materialize or that the goodwill of the Pudgy Penguins community regarding PENGU will grow or be sustained over any period of time,” the filing notes.

And even if there was, “Shareholders will not receive the rights or benefits afforded to direct holders of PENGU.”

While the PENGU token has been falling steadily from an all-time high market capitalization of nearly $3 billion on Jan. 6 to its current $420 million, it briefly spiked 7.4% this morning before falling back.

Earlier this week, Canary Capital filed a possibly more serious application for a Sui ETF, the first proposed for the No. 22 cryptocurrency with a market capitalization of $861 million, according to CoinGecko. Canary Capital has also filed for five other ETFs holding Axelar, Litecoin, Hedera, Solana and XRP.