Member Info for Odog999

In relation to the comment on not being able to fully fullfill the 1 for 5 subscription, it is my understanding that this would have no effect when compared to a full fullfillment. Essentially, as I tried to explore in my post 28/01, the accretion from the rights is fully offset by the dillution of shares already held. This holds irrespective of share price movement (so long as share proce > rights price), and the ratio. Simply put, should the ration be 1 for 6, for example, the dillution of existing shares held would be less, fully offsetting the lower number of new shares awarded. Again as I attempted to explore there, rights issues do not make you any better off on aggregate other than you own the same proportion of a larger company. The company has only grown by the amount raised by existing shareholders, and assuming excercised in full, each shareholder owns the same proportion of the company as they did prior to the issue. Thus, yes they own a larger position nominally, but that is directly proportional to the amount raised by the issue. They own the exact same proportion of the company.

Now my only caveat here is that I'm not 100% sure how this works in relation to discount. My hunch would be that (in a perfectly efficient market) there would be no impact on the discount, as the TERP would account for prevailing discount.

Of course, how markets and investors actually respond to these announcements varies from the theory and mathematics. But I think what we were originally trying to establish was whetehr 37.2p was a 'bargain'. My response was to try and show that actually you are basically just increasing your position with no 'real' accretion for the individual investor => not a bargain & not expensive, just increasing your position. You only lose if you dont excercise.

Continued here as I didn't mean to hit enter:

I was only really discussing the use of fully dilluted NAV at the marginal decision of excercising. Right now, you are entitled to the NAV. But you also know that should the option be excercised in full, once ex. you are only entitled to the dilluted NAV. Still, that doesn't quite make sense as to why Morningstar would use dilluted NAV If using current share price. If using dilluted NAV, the share price should be the price of the share minus value of rights option (>0) . Such a calculation to me only makes sense once ex. rights. Calculating a discount based on current price and dilluted NAV is therefore misleading, as it doesn't account for the fact that you will be purchasing a share at a discount to the current share price, where that discount is directly offset by the dillution of existing shares held. If you are to use the dilluted NAV, you should compare that to the TERP, and not the current price.

The reason that the fully dilluted NAV is important is that it calculates the dillutive effect of a rights issue. Im sure you are familliar with Theoretical Ex Rights Price (TERP)

I've just done some maths and it looks to me that essentially the marginal accretion - purchasing NAV (dilluted) of 88.96p for 37.2p (51.76p) is fully offset by the marginal dillution of your existing 5 shares 5*(99.31-88.96) = 51.75p. The fully dilluted NAV accounts for the c.£7.8m raised also. Also, given this calculation your purchase is effectively 'at NAV'. Not a deterrent - you only lose if you do not exercise the subscription. However, C.P., you should probably see the share price fall to reflect the NAV dillution per share maintaining the discount. If there is no move in the share price following subscription, the shares are automatically moving to a premium (assumption of current discount pre subscription). Thus, if the dillution is fully reflected in the share price you are no better off, no worse off, you are just invested in a trust that is now c.£7.8m larger. Let me know if the maths tracks

There was always going to be a small pullback, I think. Saw some heat come out of the underlyings yesterday. Just look how they've opened up today, though. GCL should open up tomorrow, but we will see. Of course, price will always be driven by sentiment, but I would love to see a run-up on the NAV again from strong underlying growth. Long-term, I think there will be a somewhat sustained level of high spot prices (>$100), which will drive more demand to the miners. Similar slight lag in gold and silver miners on their recent run. Having said that, I think upward spot prices are already accounted for somewhat, its just to what extent?

It would appear to me now that a larger portion of the recent gains has been driven by a narrowing of the discount. I still remain optimistic. I think we could continue to see positive news flow in the coming weeks and months. NexGen's Feb hearing could have a significant influence on the NAV in the very near term.

The discount closing in (marginally) is a small indication of sentiment from what is, almost solely, retail investor base. I think the key growth is coming through from the NAV (share price of underlyings). It will be interesting to see the impact of NexGen's 2nd hearing in Feb as another near-term catalyst. Curious if anyone has done the analysis to see what kind of p(success) of hearing is baked into the price.