Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This information should be read in conjunction with the financial statements and notes included in Item 15 of Part IV of this annual report on Form 10-K (this “Form 10-K”). This Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and such forward-looking statements involve risks and uncertainties. All statements (other than statements of historical fact) included in this Form 10-K that address activities, events or developments that may occur in the future, the Trust’s operations, the Sponsor’s plans and references to the Trust’s future success and other similar matters are forward-looking statements. Words such as “could,” “would,” “may,” “expect,” “intend,” “estimate,” “predict,” and variations on such words or negatives thereof, and similar expressions that reflect our current views with respect to future events and Trust performance, are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties that are difficult to predict and many of which are outside of our control, and actual results could differ materially from those discussed. Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed therein. We express our estimates, expectations, beliefs, and projections in good faith and believe them to have a reasonable basis. However, we make no assurances that management’s estimates, expectations, beliefs, or projections will be achieved or accomplished. These forward-looking statements are based on assumptions about many important factors that could cause actual results to differ materially from those in the forward-looking statements. We do not intend to update any forward-looking statements even if new information becomes available or other events occur in the future, except as required by the federal securities laws.
Organization and Trust Overview
The Trust is a Delaware statutory trust, formed on July 24, 2025, pursuant to the Delaware Statutory Trust Act (“DSTA”). The Trust was initially registered with the name of Jura Pentium Trust 13. The Trust changed its name from Jura Pentium Trust 13 to 21Shares Hyperliquid ETF on October 27, 2025. The Trust changed its name from 21Shares Hyperliquid ETF to 21Shares Hyperliquid Staking ETF on August 25, 2026. The Trust operates pursuant to the Trust Agreement. The Trust is managed and controlled by the Sponsor. The Sponsor is a limited liability company formed in the state of Delaware on June 16, 2021, and is a wholly owned subsidiary of 21co Holdings Limited. The ultimate parent company of 21co Holdings Limited is FalconX. The Sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator with respect to the Trust, or a commodity trading advisor with respect to the Trust. The Trust is an exchange-traded fund that issues common shares of beneficial interest representing fractional undivided beneficial interests in its net assets that trade on the Exchange. The Shares are listed for trading on the Exchange under the ticker symbol “THYP”.
On March 18, 2026, the Initial Seed Capital Investor, subject to conditions, purchased the Initial Seed Shares at a per-Share price of $50.00. Total proceeds to the Trust from the sale of the Initial Seed Shares were $100. Delivery of the Initial Seed Shares was made on March 18, 2026. These Initial Seed Shares were redeemed for cash on March 23, 2026.
On May 11, 2026, the Sponsor, in its capacity as the Initial Seed Capital Investor, subject to conditions, purchased 20,000 Shares (the “Seed Creation Baskets”) at a per-Share price of $24.40. Total proceeds to the Trust from the sale of the Seed Creation Baskets were $488,079. Delivery of the Seed Creation Baskets was made on May 11, 2026.
The Trust’s investment objective is to seek to track the performance of HYPE as measured by the performance of the FTSE Hyperliquid Index (the “Pricing Benchmark”), adjusted for the Trust’s expenses and other liabilities, and to reflect rewards from staking a portion of the Trust’s HYPE, to the extent the Sponsor in its sole discretion determines that the Trust may do so without undue legal or regulatory risk, such as, without limitation, the risk of jeopardizing the Trust’s ability to qualify as a grantor trust for tax purposes. FTSE International Limited is the administrator for the Pricing Benchmark (the “Pricing Benchmark Provider”). The Pricing Benchmark is designed to reflect the performance of HYPE in U.S. dollars. In seeking to achieve its investment objective, the Trust holds HYPE and the Administrator values the Shares daily as of 4:00 p.m. ET based on the Pricing Benchmark.
The Trust issues Shares only in Creation Baskets of 10,000 or multiples thereof. Creation Baskets are issued and redeemed in exchange for cash or in-kind for HYPE. Individual Shares will not be redeemed by the Trust but are listed and traded on the Exchange under the ticker symbol “THYP”. The Trust issues Shares in Creation Baskets on a continuous basis at the applicable NAV per Share on the creation order date.
The Trust pays the unitary Sponsor Fee of 0.30% of the Trust’s NAV. The Sponsor Fee is paid by the Trust to the Sponsor as compensation for services performed under the Trust Agreement. The Sponsor Fee accrues daily and is payable in HYPE at least quarterly in arrears. The Administrator calculates the Sponsor Fee on a daily basis by applying an annualized rate to the Trust’s NAV, and the amount of HYPE payable in respect of each daily accrual is determined by reference to the Pricing Benchmark.
The Trust is an “emerging growth company” as that term is used in the Securities Act, and, as such, the Trust may elect to comply with certain reduced public company reporting requirements.
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Staking
The Trust’s staking model aims to maximize the portion of the Trust’s HYPE available for staking while controlling for liquidity and redemption risks. The model determines a utilization rate by balancing expected yield against potential costs (including borrowing costs during redemptions, assuming the Trust has access to suitable credit).
The Staking Services Provider exercises no discretion as to the amount of the Trust’s HYPE to be staked or the timing of the Staking Activities. While the Trust may stake a maximum of 100% of its HYPE holdings, the amount of HYPE that remains unstaked is determined based on the Trust’s Utilization Rate analysis and accordingly may vary from time to time. Based on Utilization Rate analysis applied to historical data, the Trust generally intends to stake between 60% and 100% of the HYPE it holds, although the amount of HYPE that is staked may be lesser or greater from time to time. The precise percentage to be staked will be based on the estimated liquidity needs of the Trust and other factors, as determined by the Sponsor.
The rewards owed or paid to the Staking Services Provider reduce the amount of HYPE rewards that are generated from the Trust’s Staking Activities that are available in the assets of the Trust. Each Staking Services Provider that generates staking rewards will be entitled to compensation determined as a portion of the staking rewards (the “Staking Provider Consideration”). The Staking Provider Consideration is paid directly to the Staking Services Provider from the staking rewards. The Sponsor, the Staking Services Provider and HYPE Custodians receive an aggregate of 30% of the staking rewards, with the remainder to be distributed directly to Shareholders at least quarterly in the form of cash distributions.
The amount of any distribution, if any, will depend on the staking rewards actually earned by the Trust during each quarter and cannot be predicted with certainty. The amount of staking rewards earned will vary based on factors including, but not limited to, the amount of HYPE held by the Trust, the percentage of the Trust’s HYPE that is staked, network staking participation rates, protocol reward rates on the Hyperliquid Network, and network conditions. Accordingly, there can be no assurance as to the amount of distributions that will be paid in any quarter, and it is possible that no distributions will be paid in a given quarter if insufficient staking rewards are earned.
Calculation of NAV and NAV per Share
The NAV of the Trust is used by the Trust in its day-to-day operations to measure the net value of the Trust’s assets. The NAV is calculated on each Business Day and is equal to the aggregate value of the Trust’s assets less its liabilities based on the Pricing Benchmark price. In determining the NAV of the Trust on any Business Day, the Administrator calculates the price of HYPE held by the Trust as of 4:00 p.m. ET on such day. The Administrator also calculates the “NAV per Share” of the Trust, which equals the NAV of the Trust divided by the number of outstanding Shares.
In addition to calculating NAV and NAV per Share, for purposes of the Trust’s financial statements, the Trust determines the net asset value of the Trust determined on a GAAP basis (“Principal Market NAV”) and net asset value of the Trust per Share determined on a GAAP basis (“Principal Market NAV per Share”) on each valuation date for such financial statements. The determination of the Principal Market NAV and Principal Market NAV per Share is identical to the calculation of NAV and NAV per Share, respectively, except that the value of HYPE is determined using the fair value of HYPE based on the price in the HYPE market that the Trust considers its “principal market” as of 4:00 p.m. ET on the valuation date, rather than using the Pricing Benchmark.
NAV and NAV per Share are not measures calculated in accordance with GAAP and are not intended as substitutes for Principal Market NAV and Principal Market NAV per Share, respectively.
Critical Accounting Estimates
The financial statements and accompanying notes are prepared in accordance with GAAP. The preparation of these financial statements relies on estimates and assumptions that impact the Trust’s financial position and results of operations. These estimates and assumptions affect the Trust’s application of accounting policies. Below is a summary of accounting policies on cash and investment valuation. There were no material estimates involving a significant level of estimation uncertainty that had or are reasonably likely to have had a material impact on the Trust’s financial condition used in the preparation of the financial statements. In addition, please refer to Note 2 to the Financial Statements included in this report for further discussion of the Trust’s accounting policies.
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Cash
Cash includes non-interest bearing, non-restricted cash maintained with one financial institution that does not exceed U.S. federally insured limits.
Investment Valuation
The Trust’s policy is to value investments held at fair value. The Trust follows the provisions of ASC 820, Fair Value Measurements (“ASC 820”). ASC 820 provides guidance for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value. ASC 820 determines fair value to be the price that would be received for HYPE in a current sale, which assumes an exit price resulting from an orderly transaction between market participants on the measurement date. ASC 820-10 requires the assumption that HYPE is sold in its principal market to market participants (or in the absence of a principal market, the most advantageous market).
The Trust utilizes an exchange traded price from the Trust’s principal market for HYPE as of 4:00 p.m. ET on the Trust’s financial statement measurement date.
Results of Operations
For the period March 18, 2026 (date of initial seeding) through June 30, 2026*
The accompanying financial statements cover the period from March 18, 2026 (date of initial seeding) through June 30, 2026. On March 18, 2026, the Sponsor, in its capacity as the Initial Seed Capital Investor, subject to conditions, purchased the Initial Seed Shares at a per Share price of $50. Total proceeds to the Trust from the sale of the Initial Seed Shares were $100. The Trust had no operations, and thus no income, expenses, gains, or losses from that date until May 12, 2026, when the Seed Creation Baskets were purchased and the Trust commenced operations. Accordingly, the discussion below covers the period May 12, 2026 through June 30, 2026, which reflects all of the Trust's results of operations for the period presented in the financial statements.
The Trust commenced operations on May 12, 2026 when the Seed Creation Baskets were purchased by The Sponsor. The price of HYPE increased 62.16% from $40.35 on May 12, 2026 to $65.43 on June 30, 2026. The increase was accompanied by a net increase in outstanding Shares, which increased from 20,000 (2 Baskets) on May 12, 2026 to 1,880,000 on June 30, 2026, as a result of 1,990,000 Shares (199 Baskets) being created and 130,000 Shares (13 Baskets) being redeemed following the issuance of the Seed Creation Baskets. The Trust had 94.43% of its HYPE holdings staked as of June 30, 2026, with an average of 91.71% staked during the period.
Net increase in net assets resulting from operations for the period May 12, 2026 (commencement of operations) through June 30, 2026 was $13,506,351, resulting primarily from a net investment income of $65,491, a net realized gain of $4,006 from HYPE sold to pay the Sponsor Fee, a net realized gain of $781,560 from HYPE sold for redemptions, a net realized gain of $12,314 from HYPE sold for distributions, and a net change in unrealized appreciation on investment in HYPE of $12,643,923, partially offset by a net change in unrealized loss of $(909) on Sponsor Fee payable and a net realized loss of $(34) on in-kind liabilities paid. Net investment income comprised Staking Rewards of $125,025, less the Sponsor Fee of $22,921 and the Staking Fee of $36,613. Except for the Sponsor Fee and Staking Fee, the Trust had no other expenses during the period.
* No prior year comparative period has been provided as this is the first year of the Trust’s operations.
Liquidity and Capital Resources
The Trust is not aware of any trends, demands, commitments, events, or uncertainties that are reasonably likely to result in material changes to its liquidity needs. The Trust’s only ordinary recurring expenses are the Sponsor Fee and the Staking Fee. In exchange for the Sponsor Fee, the Sponsor has agreed to assume the ordinary fees and expenses incurred by the Trust, including but not limited to the following: fees charged by the Administrator, the HYPE Custodians, the Transfer Agent and the Trustee, the Marketing Fee, the Exchange’s listing fees, typical maintenance and transaction fees of the Depository Trust Company (“DTC”), SEC registration fees, printing and mailing costs, website fees, tax reporting fees, audit fees, license fees and expenses, up to $100,000 per annum in ordinary legal fees and expenses. The Sponsor bears expenses in connection with the Trust’s organization and initial offering costs.
The Sponsor is not required to pay any extraordinary or non-routine expenses. Extraordinary expenses are fees and expenses which are unexpected or unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses. Extraordinary fees and expenses also include material expenses which are not currently anticipated obligations of the Trust. The Trust will be responsible for the payment of such expenses to the extent any such expenses are incurred. Routine operational, administrative, and other ordinary expenses are not deemed extraordinary expenses. The Sponsor Fee and the Staking Fee are payable in HYPE, and the Trust will deliver or sell HYPE on an as-needed basis to satisfy those obligations and to fund distributions.
Off-Balance Sheet Arrangements
The Trust does not have any off-balance sheet arrangements.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risks
The Trust is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information otherwise required under this item.