Nuveen NY Dividend Advantage Fund: Odd Pricing Behavior Yesterday

Includes: NAN, PYN
by: George Spritzer, CFA

Most municipal closed-end funds had a down day yesterday . The Nuveen Municipal Closed-end Share Price Return Index (^NMUNP) was down 1.13%.

But a big exception was the Nuveen NY Dividend Advantage Fund (NYSE:NAN). This fund goes ex-dividend today (November 10) and will pay a dividend of $0.0655 per share. But the price went absolutely haywire yesterday at 3:59:07 PM. There was a series of 21 trades that quickly “walked the price up” from 14.14 to 14.52 in three seconds. It almost looked like a “flash crash”, but on the upside, not the downside. NAN closed up 2.54% for the day.

If someone put in a big buy order to “capture the dividend”, they paid up by 38 cents to capture a six cent dividend, not the brightest thing in the world.

Another possibility is that a big short seller was forced to buy back his shares, because there were no more available shares to loan. This often occurs right around the ex-dividend date, and is one of the reasons why short selling of closed-end funds can be very risky.

Another fund that also “bucked the trend” yesterday was Pimco NY Municipal Income III (NYSE:PYN) which was up 2.17%. PYN went ex-dividend on Monday. I wonder if a forced short sale buyback occurred there as well, although the up move in PYN was a little more gradual and occurred over the last 90 minutes of the trading day. Again it looked like the price was walked up to 10.00 when a big block executed at 3:37 PM. It wouldn’t surprise me if this was also a forced short sale buyback.

Full Disclosure: No personal positions. Some clients are long NAN.