Your Chance to Grab Some PHYSical Gold
Some of you might be wondering why PHYS is down more than 7% intraday today on an up-day for gold, and the reason is that it's a gift from gold gods. :P
Seriously, though, let's talk about what's going on here.
The premium built into PHYS shares over recent weeks -- that is, the difference between the net asset value of its gold holdings and the traded market value of shares outstanding -- had grown to rather epic excess recently as investors clamored to get into this new and more reliable gold proxy as a welcome alternative to the highly questionable GLD.
Those of you who have followed my coverage of the sector for the past several years will recall the number of times I have called to your attention the share offerings in CEF as timely opportunities to go long the shares. For existing shareholders, the temporary erasure of the premium is not a source for concern, since these share offerings in both CEF and PHYS are non-dilutive. In fact, they are welcome developments to holders because costs decrease as the scale of the closed-end funds grows. CEF recently performed a share offering of its own, and now PHYS has followed suit with an offering of almost 25 million new shares. What this means is that the fund intends to buy some $280 million worth of gold over the coming weeks, which is not an unwelcome development in the gold market.
The premiums are themselves a bullish signal in these closed-end funds, indicating that demand exceeds supply.
Any questions? I will be busy today, so I may have to defer answers until tomorrow, but please take notice of my reminder that share offerings in reliable closed-end bullion funds represent compelling entry points.
Long and strong,
Sprott Physical Gold Trust (the "Trust") (TSX:PHY.U - News)(NYSE:PHYS - News), a trust created to invest and hold substantially all of its assets in physical gold bullion and managed by Sprott Asset Management LP, has priced its follow-on offering to the public (the "Offering") of 21,600,000 transferable, redeemable units of the Trust ("Units"). As part of the Offering, the Trust has granted the underwriters an over-allotment option to purchase up to 3,240,000 additional Units.
The Units have been priced at US$11.25 per Unit. The gross proceeds from the Offering will be US$243,000,000 (US$279,450,000 if the underwriters exercise in full the over-allotment option).
The Trust intends to use the net proceeds of this Offering to acquire physical gold bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to this Offering. The net proceeds of the Offering per Unit will be greater than 100% of the most recently calculated net asset value per Unit of the Trust prior to pricing of the Offering, which is required under the trust agreement governing the Trust.