On April 21, 2014, Cornerstone Progressive Return Fund (NYSE:CFP) announced on its website that it has fixed the close of business on May 1, 2014 as the record date for determination of shareholders entitled to participate in the Fund's 1-for-3 rights offering.
Each shareholder will receive one non-transferable right for each share of the Fund held as of the record date. For every three rights a shareholder receives, he or she will be entitled (but not required) to purchase one new share of the Fund at a subscription price equal to the greater of (NYSE:I) 107% of net asset value per share as calculated at the close of trading on the expiration date of the offering or (ii) 90% of the market price per share at such time. Fractional shares will not be issued. In addition to the shares offered in the primary subscription, the Fund may offer a 100% over-allotment to oversubscribing shareholders. Shareholders who fully subscribe in the primary offering will have the option to oversubscribe for additional shares, to the extent available.
Shares will be issued within the 22-day period immediately following the record date of the Fund's monthly distribution to shareholders. Shareholders exercising their rights to purchase shares pursuant to the offering will not be entitled to receive such distribution with respect to the shares issued pursuant to such exercise.
An example for investors who currently own shares of CFP: You may buy additional shares directly through the company for a discount. Based on the open of April 22, 2014, the share price is $5.23. The price of the right is the higher of the 2 options. The first option is the 107% times the NAV. (1.07 times the NAV - $4.21 [from the company website] equals $4.5047). The other option is 90% of the market price (.90 times $5.23 equals $4.707). The company will offer the higher of the two, so the rights option would save the investor 10% at the price of $4.707. That would increase the dividend yield from 17.72% to about 19.68% against the purchase price of the rights offering. A dividend over 10% is good, and a dividend 17% to 19% is excellent. A good stock to have for the dividend return, and a sweet offer to increase your holdings.
The offering is subject to an effective registration statement covering the rights and shares to be issued and to other customary regulatory filings and approvals. Any rights offering conducted by the Fund will be made only by means of a prospectus.
In June, 2013, CFP suspended a rights offering due to a significant drop in the share price. The news release is on the company web page.
Two other Cornerstone Funds that had rights offerings include Cornerstone Strategic Value Fund, Inc. (CLM) and Cornerstone Total Return Fund, Inc. (CRF). Both had successful rights offerings in December 2013.
Cornerstone Progressive Return Fund is a closed-end, diversified management investment company and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended.
For further information regarding the Fund's rights offering, or to obtain a Prospectus, please contact AST Fund Solutions, LLC, the Fund's Information Agent, toll-free at (800) 581-4001. For more information regarding the Fund, please visit cornerstoneprogressivereturnfund.com.
Our recommendation for anyone holding shares of CFP is to contact the company and through the prospectus, exercise the right for additional shares.
Disclosure: I am long CFP, CRF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.