New Germany Fund's Tender: Not Fooling Anyone (GF)

The New Germany Fund (GF) announced that its board has authorized a tender offer for up to 10% of the fund’s outstanding shares if its daily volume weighted average discount is over 10% between July 1st and the end of this year. Missing from the announcement is any discussion of why they are doing this.

I think there are a couple of possible reasons why the tender offer was announced. One is that the board believes that this will keep the discount in check. However, I don’t believe that a one time offer for only 10% of the fund’s outstanding shares will have more than a negligible effect on the discount over the longer term.

Another possibility is that the board is trying to seem shareholder friendly prior to the contested shareholder meeting coming up in a few weeks. If the board is interested in presenting more than just the appearance of shareholder friendliness they should drop the fund’s untenable director qualifications. As I’ve written before, without the risk of free elections, why would the board have more loyalty to the shareholders of GF than to Deutsche Asset Management?

Each shareholder will reach their own conclusion on the merits of the arguments for and against the current management of the Germany Fund, but no shareholder should hold on to the illusion that they are anything but second class citizens in the current board’s view.

GF 1-yr chart: