Sprott' offer to take over GTU

[ER59]

Any one who holds GTU - is Sprott's offer good or not?

[kbird]

Re: Sprott' offer to take over GTU

http://kiddynamitesworld.com/closed-...ile-takeovers/

[Milton Kuo]

Re: Sprott' offer to take over GTU

Any one who holds GTU - is Sprott's offer good or not?

I own shares of GTU and do not intend to tender my shares to Sprott. (I also rejected the Polar offer.) It seems to me that Sprott's offer is only beneficial to shareholders who want to liquidate now and do not want to sell at a discount to NAV; or shareholders who do not believe that the discount to NAV will narrow or disappear if gold re-enters a bull market. Being that it may take years before it is time to sell gold, I want to minimize the fees I pay and GTU's fees are lower than Sprott's. For the ability to take physical delivery, I have other gold investments that address that potential need such as BullionVault.

[ER59]

Re: Sprott' offer to take over GTU

I remember that even when gold was near its high ~$1800, GTU still had ~4% discount to NAV. Don't know how much higher Sprott's fees are, but it must take a lot of years to cover 4%.

[tmicou]

Re: Sprott' offer to take over GTU

Management fees for PHYS are .35% http://sprottphysicalbullion.com/spr...al-gold-trust/
Management fees for GTU are .197% http://www.cefa.com/FundSelector/Fun...l.fs?ID=120345
for a difference of .153%.

Right now, discount on GTU is ~7%, and PHYS is .58%

So a question: Why not purchase GTU into a retirement account at the 7% discount, then opt for the Sprott exchange. If the acquisition doesn't go through, you still get Sprott, but the retirement account should nullify the tax consequence. If it does go through, then you get Sprott automatically no matter what. What am I missing?

[Milton Kuo]

Re: Sprott' offer to take over GTU

I remember that even when gold was near its high ~$1800, GTU still had ~4% discount to NAV. Don't know how much higher Sprott's fees are, but it must take a lot of years to cover 4%.

I remember differently. GTU has traded at a premium to NAV in the past and, when the premium was high enough, that was typically when the trust bought more bullion and created additional shares.

[Milton Kuo]

Re: Sprott' offer to take over GTU

Management fees for PHYS are .35% http://sprottphysicalbullion.com/spr...al-gold-trust/
Management fees for GTU are .197% http://www.cefa.com/FundSelector/Fun...l.fs?ID=120345
for a difference of .153%.

Right now, discount on GTU is ~7%, and PHYS is .58%

So a question: Why not purchase GTU into a retirement account at the 7% discount, then opt for the Sprott exchange. If the acquisition doesn't go through, you still get Sprott, but the retirement account should nullify the tax consequence. If it does go through, then you get Sprott automatically no matter what. What am I missing?

I've thought about doing what you're suggesting, too, since my shares are in a tax-advantaged account. I've even given consideration to doing an arbitrage trade.

I don't think you're missing anything. To a large part, it's a matter of what one guesses will happen in the future. I believe that if gold re-enters a bull market, GTU's discount to NAV will disappear and GTU may even trade at a premium to NAV in that instance. I figure worse come to worst, if in the future gold goes up tremendously (perhaps a new IMS with gold prices somehow set as an anchor of sorts) and GTU still trades at a discount, shareholders could request a redemption at that time.

[ER59]

Re: Sprott' offer to take over GTU

Wouldn't it be logical to assume that if now, at the current gold price, GTU discount is 7% and PSYH .5%, so when gold moves higher and GTU discount disappears or even turns into a premium, PSYH will trade at even bigger premium to NAV,? I mean the discount(premium) ratio between these two funds will be more or less the same?

[tmicou]

Re: Sprott' offer to take over GTU

Wouldn't it be logical to assume that if now, at the current gold price, GTU discount is 7% and PSYH .5%, so when gold moves higher and GTU discount disappears or even turns into a premium, PSYH will trade at even bigger premium to NAV,? I mean the discount(premium) ratio between these two funds will be more or less the same?

It would seem to me that would be true simply because PHYS is a better, more flexible structure and therefore is more desired and therefore commands a higher premium (or lower discount).

[ER59]

Re: Sprott' offer to take over GTU

Today gold is down $5, but GTU is up almost 2%, is this an indication that Sprott's offer is being viewed as positive or are there other GTU news?

[Milton Kuo]

Re: Sprott' offer to take over GTU

Today gold is down $5, but GTU is up almost 2%, is this an indication that Sprott's offer is being viewed as positive or are there other GTU news?

GTU has amended their redemption terms to allow shareholders to redeem their shares at 95% of NAV.

[Milton Kuo]

Re: Sprott' offer to take over GTU

Wouldn't it be logical to assume that if now, at the current gold price, GTU discount is 7% and PSYH .5%, so when gold moves higher and GTU discount disappears or even turns into a premium, PSYH will trade at even bigger premium to NAV,? I mean the discount(premium) ratio between these two funds will be more or less the same?

That was not the case in the not-so-distant past. I seem to recall instances where the premium over NAV for GTU was 5% or so greater than the premium on shares of PHYS. It was under those circumstances that I sold all of my shares of GTU and bought shares of PHYS, and vice versa, as the premium spread between the two trusts' NAV varied.

[charliebrown]

Re: Sprott' offer to take over GTU

I have played arbitrage between phys and gtu a couple of times an won. This last time no. GTU was -4% i traded PHYS for GTU, then it went to -8% and pretty much stayed there. If PHYS trades at a premium large holders would redeem the gold and bring the premium back down.

[charliebrown]

Re: Sprott' offer to take over GTU

Yes also if the premium got too big for GTU, GTU would issue new shares and use it to buy more bullion. One could trade GTU for GTU and make a nice profit, because after the new shares were announced the price would plummet.

[charliebrown]

Re: Sprott' offer to take over GTU

I don't think it is really that much more flexible, if you read the fine print to redeem phys, you only have a small window of time each month, and you have to take one good delivery bar which is 400Oz or roughly 400,000 bucks. Too rich for me. After the new amendment to the GTU trust to allow a cash exchange for GTU shares if they are 95% of NAV or less, this makes GTU more attractive, and I guess should keep the price within 5% of NAV. However ... I think the amendment goes into effect on July 14th, and the sprott deal is closing July 1. Is this a dupe to keep some people from tendering their shares?

What if I don't tender and the deal goes through there was some clause about best efforts to convert shares ... What does that mean?
I don't get the best price???

Confusing mumbo jumbo of lawyers, maybe I should reduce my holdings just in case...