SPROTTS DIVIDEND ELIMINATED
by marapress | August 14, 2013 1:25 pm
i took a hit on this investment. they have been buying up at higher prices their own stock all year, they should have waited till later?
now they are posting a New Bid at these prices?
http://www.sprottresource.com/investors/press-releases/press-release/?prId=122625[1]
Endnotes:
- http://www.sprottresource.com/investors/press-releases/press-release/?prId=122625: http://www.sprottresource.com/investors/press-releases/press-release/?prId=122625
Source URL: https://www.stockgumshoe.com/2013/08/microblog-sprotts-dividend-eliminated/
Yep, bad news. Not necessarily because they canceled the dividend, but because of what that means about how poorly they have been thinking and planning all year, including the initial decision to start paying a dividend. I gave them the benefit of the doubt for past investment success, including some hugely profitable exits, but this is another indicator that faith may have been misplaced and they don’t have the predictable cash-generating portfolio they anticipated. I’m working through the numbers and re-evaluating my opinion about this one now, I’ll share when I’ve made some decisions.
I took a closer look and thought it through some more, here’s my note explaining what I’ve done with my Sprott holdings and why: http://stockgumshoe.com/2013/08/whats-up-with-sprott-resource-corp/
Yes, this was quite a badly managed situation! Also; if I understand the structure correctly, they charge 2% in “management fee” (and 20% of profits) like a hedge fund, but with a huge chunk being gold – it is a rather extreme fee for that! In fact Sprotts own gold ETF charge much less than that – and certainly no 20% performance fee!
Dividends from Canada is charged 25% foreign withholding tax (with my double tax agreement) that I can not get refunded – so their structure of actually paying out capital gains as dividends actually cost me a fortune – which is why I sold when they started the dividend policy – so this might actually be a blessing in disguise for me….
Also noted that they argued that they would not continue the dividend partly due to golds drop in price…hmmm… I certainly hope that it was the BUSINESSES earning me my dividend as gold have never earned any income (instead it costs a stiff 2%/20% hedge fund level fee).
I am watching it from a distance for now; but am not impressed with how this has been handled! Cheers!
Good points, I was willing to tolerate the 2/20 because it was effectively most of their overhead — but they did less to earn it this year, that’s for sure.
Since the 20% is based on the “highest water mark” (of book value) and with gold being well down -it could be a while before they get back into the fat and nice(for them!) 20% performance collecting. I have not looked at the specific numbers though. Cheers!