12478 | Travis Johnson, Stock Gumshoe Oct 14 2019, 09:46:49 am GDV is a closed-end fund, and a subscription rights offering like this is much like a secondary offering for a common stock — they give current shareholders a slight discount in order to raise more money and expand the fund. In technical terms, it’s sort of like a warrant — you’ll get a subscription right for each share you hold, and you can buy new shares for 10 subscription rights plus $20 each. The current share price is above $20, so this is a “discount” to induce you to buy more shares at about 3-5% less than market price (and the fund trades at a 9.5% discount to NAV as well). IT’s good for the fund manager, because it means they’ll have more shares outstanding and will earn a little more of a management fee… and since they’re raising more cash it should also serve to decrease the discount rate a little bit — though it does that by reducing the NAV rather than bringing up the share price (they’re bringing in $20 per new share in cash when the current NAV is $22.50 per share, so the NAV per share will fall a little). The subscription rights should also trade for a little while — sounds like they’ll be tradeable for a month or so before the rights offering happens, so if you don’t want to exercise that right you can probably sell them for a few cents (as of today, with the fund at $20.64 per share and with 10 subscription rights giving you the right to buy at $20, the math would mean a subscription right should be worth about six cents). I wouldn’t overthink it unless this is a very large holding. The right to buy more shares at $20 is not terribly valuable when the market price is $20.64 so you’re not missing out on much if you decide to think it over — think about whether you want to allocate more to this fund, not about the immediacy and deadline of the subscription rights. 0 Likes What These Icons Mean The user who posted this comment is a Stock Gumshoe Premium Member (also known as an "IRREGULAR"). This user regularly writes articles for Stock Gumshoe. They may or may not be the author of the current article. This user's comments have been "liked” by at least a few members of the Stock Gumshoe community. This user has commented widely, with input that has been liked enough to earn a two-thumbs-up rating from other readers. This is the highest rating a user can get. They are among the most respected commentors of our community. Copyright ©2019 Stock Gumshoe unless otherwise noted.