Shareholder activists are trying to unlock the NAV discount on GTU

[dualstow]

Got my vote info via email today.  I can vote online.

Got my paper mail today, thankfully.

Three copies.

[rickb]

So, is GTU, with its discounts and premiums to NAV, like a gold mining stock which may rise or fall based on investor sentiment re bullion prospects?  If GTU is similar to a gold mining stock, just how similar or different?

Thanks.

GTU and gold mining stocks both rise and fall based on investor sentiments.  The similarities basically stop there. 

As previously discussed, GTU owns a pile of gold and each share corresponds to a fraction of ownership of this gold. 

Gold mining stocks are shares of gold mining companies, which (generally speaking) dig giant holes in the ground where they think they're likely to find gold, and process what they dig up to extract the gold (an ounce of gold per 5 tons of ore is not too bad).  Assuming their costs are the same, they're more profitable if the price of gold is higher so their share prices generally go up and down with the price of gold (usually amplified relative to the price change in gold).

[Libertarian666]

I voted for management's position. I'm fine with the discount as long as I'm accumulating, and I'm sure this won't be the last proxy battle if the gold bear market continues for another couple of years.

During a gold bull market, the discount typically vanishes and is replaced by a premium, so obviously now is the time to buy and then is the time to sell.

[stuper1]

Why doesn't PHYS have the same big discount as GTU the past couple years?

[Libertarian666]

Why doesn't PHYS have the same big discount as GTU the past couple years?

Because PHYS has a physical redemption option. Gee, I wonder if that has any relation to its ticker symbol? 

[steve]

As a GTU unit holder for a long time. I am 100% against polar.  My opinion is that will ruin all that is good about central gold trust.  Without going into a lot of detail premiums and discounts are controlled by the unit holders, no one is forced to sell at a discount. If you adhere to the PP philosophy the discount works for us, we buy when an asset is out of favor and sell when it is in favor. When in favor assets trade at a premium. What polar is trying to do is make GTU more of a trading vehicle than for long term holders like us who only re-balance when necessary. This thing with polar is very bad, basically a hostile attempt to take over to benefit a few very big traders that want to make a quick profit at everyone else s expense. Expenses will be passed on to the unit holders. I voted against polar and hope all my friends here do as well.

http://www.gold-trust.com/rejectpolar/q ... swers.html

[hoost]

Thanks for all the discussion here everyone. I wasn't sure which way to go at first, I think I've been convinced to go with management's position.

[LazyInvestor]

I voted against Polar.

[steve]

This article makes some very good points.
Long-Term Central GoldTrust Investor Joins Mounting Support Opposing Polar Proposal
well stated objection to Polar
Our primary objection however is to opportunistic shareholders who buy shares in vehicles with stated objectives, knowing full well the objectives and investment principles of such vehicles, as well as their trading patterns, in order to overturn the fundamental purpose and role of those vehicles. If Polar Securities is against funds trading at a discount, it should not have purchased units that frequently trade at discounts.


http://www.marketwatch.com/story/long-t ... -181733933

[steve]

my email question tor polar
contact@shorecrestgroup.com

I am a holder of gtu units, when I purchased units I did it with the full knowledge that it trades at a premium or discount depending on market sentiment  . This has always worked very well for me, I purchase at discount when gold is out of favor and sell to re balance my account when gold is in favor,
Now for my question why did you buy gtu units in the first place knowing all along the structure and how it trades?

Steve

[stuper1]

Why doesn't PHYS have the same big discount as GTU the past couple years?

Because PHYS has a physical redemption option. Gee, I wonder if that has any relation to its ticker symbol? 

PHYS is a closed-end fund like GTU.  Why does PHYS allow physical redemption and GTU doesn't?

[steve]

      PHYS is a closed-end fund like GTU.  Why does PHYS allow physical redemption and GTU doesn't?

Each fund has a different structure  and objective to accommodate  different types of investors.

Central Gold Trust (GTU) has objectives that work perfect for PP strategy

    At current gold prices, GoldTrust has an embedded taxable gain of C$358 per ounce on its gold bullion holdings; this gain would increase on a dollar-for-dollar basis if the gold price were to increase over time, as many of our Unitholders expect it will.
    A redemption of 20% of the outstanding Units of GoldTrust, similar to the recent net redemptions experienced by Sprott Gold, would result in a taxable gain to GoldTrust of approximately C$51 million – such gain would flow through on a pro-rata basis to all U.S. Unitholders who have made a QEF election, despite them not having sold or redeemed their Units. For example, a non-redeeming U.S. Unitholder holding 1,000 Units would receive a tax bill for approximately US$800, a bill which could increase to nearly US$1,700 if the gold price were to increase to US$1,800 per ounce at the time redemptions were made.
    Polar dismisses these tax consequences as immaterial – the Board of Trustees believes that imposing ANY negative tax consequences on non-redeeming Unitholders to facilitate an offshore hedge fund’s shortterm trade is fundamentally unjust.

[vtc]

3% jump today closing in on the discount gap. posted about it here:
http://gyroscopicinvesting.com/forum/go ... r-bullion/

[dualstow]

I hold GTU in three accounts, so I guess I get three votes. Against Polar. Thanks to Steve and others for stating your case.

[steve]

I hold GTU in three accounts, so I guess I get three votes. Against Polar. Thanks to Steve and others for stating your case.

Every single GTU unit you have represent a vote

[dualstow]

Right.  It's really just 3 control numbers that I have, for my measely # of shares. 

[Wooly Mammoth]

I've voted against Polar too. Their case sounds reasonable the way they state it, but I have difficulty trusting an entity that swoops in, buys a huge chunk of units, then stages a hostile takeover in an attempt to change the fundamental nature of the fund to their advantage. If their resolution passes, I'm sure they will waste no time redeeming their units at NAV and absconding with a tidy profit.

For myself, if the resolution passes I'm going to wait for the bump (if there is one) and sell, moving my gold allocation elsewhere. I don't want my precious metal in the hands of people I don't trust. Either way, this has been a good learning experience.

[steve]

I've voted against Polar too. Their case sounds reasonable the way they state it, but I have difficulty trusting an entity that swoops in, buys a huge chunk of units, then stages a hostile takeover in an attempt to change the fundamental nature of the fund to their advantage. If their resolution passes, I'm sure they will waste no time redeeming their units at NAV and absconding with a tidy profit.

For myself, if the resolution passes I'm going to wait for the bump (if there is one) and sell, moving my gold allocation elsewhere. I don't want my precious metal in the hands of people I don't trust. Either way, this has been a good learning experience.

The way they state there case sound very disingenuous. When people invest in a closed end fund they do it with the full knowledge that it could trade at a premium or discount to NAV. depending on market sentiment.  Central Gold Trust has a structure that benefits many exactly the way it is They have just recently bought units at a discount and want to change the structure of the fund so they can get a quick profit and at the same time ruin it for everyone else.

[dualstow]

Yes, as you pointed out in your question to Polar, why would they buy shares in the first place? This is not a naive individual but an entity that knew what it was getting into. If this were a movie, Polar would be represented by Danny Devito in a black suit.

[jason]

I bought GTU over PHYS, in the first place, because PHYS has the extra taxes.  Polar called me and tried to tell me that the taxes would be very small if physical redemption is added to GTU. But after doing some digging, it appears that adding physical redemption will increase the cost of ownership from the current amount of 0.3 something percent per year (expense ratio) to over 1% per year, with the extra taxes added in. The numbers are calculated based on the historical redemption rate of PHYS. Sure, the discount will go down to almost zero in the short term, but I will pay that back in spades in the long term. I am in my 40s and plan on holding GTU, possibly, for the rest of my life. The taxes will be a killer after 40 years of 1%+ annual costs, when you add the taxes to the expense ratio. And the GTU discount will likely turn into a premium, on its own, as soon as the price of gold starts to rise. Polar's plan seems to be extremely short sighted. I will be voting against Polar. If you already voted for Polar, you can still change your vote and vote against them. Just go to the GTU website. Does anyone have any info that contradicts my figures regarding the taxes?  I will wait to vote until I see responses. But Wednesday is the deadline, I think, so I will be voting by Tuesday. If my numbers are correct, I will definitely vote against Polar.

[vtc]

I follow this blog linked below and there was a great write up of the events taking place, even though his view's differ from a lot of us here, but his views seem to be actually facts.

A lot us think that we don't want the "takeover" since it can increase taxes and only benefits Polar.    We cannot assume that the NAV discount will close up and become a premium when gold rallies, just because it did in the past.  Therefore the taxes and expense ratio increases arising from redemption are pennies compared to the dollars gain in value from closing up the NAV gap.

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

Thoughts?

[steve]

I follow this blog linked below and there was a great write up of the events taking place, even though his view's differ from a lot of us here, but his views seem to be actually facts.

A lot us think that we don't want the "takeover" since it can increase taxes and only benefits Polar.    We cannot assume that the NAV discount will close up and become a premium when gold rallies, just because it did in the past.  Therefore the taxes and expense ratio increases arising from redemption are pennies compared to the dollars gain in value from closing up the NAV gap.

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

Thoughts?

My thoughts are simple I like GTU exactly the way it is, I like that it does not have redemption's, and very low expenses, the discount to NAV makes it attractive and perfect for PP, we are buyers when gold is out of favor and sellers when it is in favor and at that time it trades at a premium.
As far as Spott goes, If I wanted to buy the Sprott Phy fund I would have.  I bought GTU because of the structure and the long term strategy of not speculating on price. It just holds the gold and does not touch it which keeps the expenses to a minimum. For those who want to buy Spott fund phy they are free to do so.  Also nothing is stopping anyone from buying Gold bullion and keeping it under their own control.

[jason]

I follow this blog linked below and there was a great write up of the events taking place, even though his view's differ from a lot of us here, but his views seem to be actually facts.

A lot us think that we don't want the "takeover" since it can increase taxes and only benefits Polar.    We cannot assume that the NAV discount will close up and become a premium when gold rallies, just because it did in the past.  Therefore the taxes and expense ratio increases arising from redemption are pennies compared to the dollars gain in value from closing up the NAV gap.

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

Thoughts?

That article is downplaying the increase in expenses/taxes for the unit holders, which is the biggest problem. Yes, a 7% or 8% gain in the short term would be great for everyone, in the short term. But if you plan on holding GTU for a long time, you will end up losing money. If the increased expenses/taxes are 80 basis points per year higher than current expenses, that will more than triple annual cost of ownership.  An 8% gain today would be lost as costs after 10 years pass. And 10 years later, another 8% will be lost as costs.  After 30 years, around 25% of your holdings will have disappeared due to the extra costs/taxes.  I was planning on holding GTU for the next 30 years, so I don't like these numbers. I'm guessing Polar is not planning on holding GTU for 30 years, in which case, they wouldn't care about long term costs.

[steve]

Central GoldTrust to Evaluate Sprott Offer And Sets The Record Straight

http://money.cnn.com/news/newsfeeds/art ... 190414.htm

[Libertarian666]

I follow this blog linked below and there was a great write up of the events taking place, even though his view's differ from a lot of us here, but his views seem to be actually facts.

A lot us think that we don't want the "takeover" since it can increase taxes and only benefits Polar.    We cannot assume that the NAV discount will close up and become a premium when gold rallies, just because it did in the past.  Therefore the taxes and expense ratio increases arising from redemption are pennies compared to the dollars gain in value from closing up the NAV gap.

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

Thoughts?

That article is downplaying the increase in expenses/taxes for the unit holders, which is the biggest problem. Yes, a 7% or 8% gain in the short term would be great for everyone, in the short term. But if you plan on holding GTU for a long time, you will end up losing money. If the increased expenses/taxes are 80 basis points per year higher than current expenses, that will more than triple annual cost of ownership.  An 8% gain today would be lost as costs after 10 years pass. And 10 years later, another 8% will be lost as costs.  After 30 years, around 25% of your holdings will have disappeared due to the extra costs/taxes.  I was planning on holding GTU for the next 30 years, so I don't like these numbers. I'm guessing Polar is not planning on holding GTU for 30 years, in which case, they wouldn't care about long term costs.

No, they are almost certainly going to cash out ASAP. Did they mention in their proposal that they just sold Sprott shares to buy GTU? If they wanted a vehicle that allows physical redemption, why didn't they stay with Sprott? The answer should be obvious: free money via cashing out the gold in GTU.