Please explain why anyone wants GTU if no redemption option??
Posted: Thu Apr 16, 2015 1:08 am
I have been reading with great interest about GTU on these forums and I just don't get why it trades at such a discount (30% below NAV in 2009!!) and 8% below NAV today.
I read about the proxy fight to establish rules to allow redemption. Which leads me to believe no redemption is possible. So basically, if I understand this right, when GTU was created, investors threw in a bunch of cash to buy gold and store the gold in a safe. And no one can ever get the gold out. So all the investors have is pieces of paper that say they have fractional ownership of the gold in the safe that no one can ever access.
So why does anyone want these pieces of paper? It seems reasonable that GTU would drop to the exact discount where someone could buy ALL of the shares at that discount and then liquidate the whole thing and take the gold. Or at least majority shares and vote on it and win.
Seriously if it was trading at 30% to NAV in 2009 why didn't a hedge fund with 100 Billion Dollars walk in, buy the whole thing (I think it's only $300M total??), liquidate and make a nice profit? Of course, if the NAV discount is 30% and someone tried to buy 51% of the shares in any short period of time, it would drive the NAV discount down as it drove the market price up. But at a 30% discount to NAV, it would still seem like someone could make a profit doing it.
Can someone explain the appeal of this type of structure as opposed to the regular ETF structure where people can redeem for gold (for a fee of course)? It seems like the ETFs that let you redeem for gold always basically track the price of gold with no significant NAV discount/premium. And isn't that what we want?
I read about the proxy fight to establish rules to allow redemption. Which leads me to believe no redemption is possible. So basically, if I understand this right, when GTU was created, investors threw in a bunch of cash to buy gold and store the gold in a safe. And no one can ever get the gold out. So all the investors have is pieces of paper that say they have fractional ownership of the gold in the safe that no one can ever access.
So why does anyone want these pieces of paper? It seems reasonable that GTU would drop to the exact discount where someone could buy ALL of the shares at that discount and then liquidate the whole thing and take the gold. Or at least majority shares and vote on it and win.
Seriously if it was trading at 30% to NAV in 2009 why didn't a hedge fund with 100 Billion Dollars walk in, buy the whole thing (I think it's only $300M total??), liquidate and make a nice profit? Of course, if the NAV discount is 30% and someone tried to buy 51% of the shares in any short period of time, it would drive the NAV discount down as it drove the market price up. But at a 30% discount to NAV, it would still seem like someone could make a profit doing it.
Can someone explain the appeal of this type of structure as opposed to the regular ETF structure where people can redeem for gold (for a fee of course)? It seems like the ETFs that let you redeem for gold always basically track the price of gold with no significant NAV discount/premium. And isn't that what we want?