GLU: Rights Offering Quick Notes


  • GLU's rights offering is now live.
  • Rights are discounted versus their intrinsic value, possibly arbitrage opportunity.
  • Do not subscribe if GLU drops below $16 at expiry.
  • I do much more than just articles at CEF/ETF Income Laboratory: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
Close up of holding hands

Kelvin Murray/DigitalVision via Getty Images

Author's note: This analysis was released to CEF/ETF Income Laboratory members as part of the CEF Weekly Roundup on May 23, 2022, with certain numbers updated.



The Gabelli Global Utility & Income Trust (NYSE:GLU) have come out with a rights offering.

These are the salient terms of the offering:

  • Each shareholder will receive one transferable right (the “Right”) for each common share held on the record date (May 12, 2022).
  • Four Rights plus $16.00 (the “Subscription Price”) will be required to purchase one additional common share (the “Primary Subscription”). The purchase price will be payable in cash.
  • Record date shareholders who fully exercise their Primary Subscription Rights will be eligible for an over-subscription privilege. This privilege entitles these shareholders to subscribe, subject to certain limitations and a pro-rata allotment, for any additional common shares not purchased pursuant to the Primary Subscription. Rights acquired in the secondary market may not participate in the over-subscription privilege.
  • The Rights are expected to trade “when issued” on the NYSE American beginning on May 10, 2022. The Fund’s common shares are expected to trade “Ex-Rights” on the NYSE American beginning on May 11, 2022. The Rights are expected to begin trading for normal settlement on the NYSE American (NYSE American: GLU RT) on or about May 17, 2022.
  • The Offering expires at 5:00 PM Eastern Time on June 23, 2022, unless extended.

Subscription strategy

This is a transferable 1-for-4 offering with an ex-rights date of May 11, 2022 and an expiry date of June 23, 2022. Like other Gabelli rights offerings, but unlike most other CEF rights offerings, GLU's subscription price is fixed, at $16.00.

The fund's price has underperformed its NAV by around -5% since the offering was announced, which again supports our recommended "sell and rebuy" strategy for funds that announce rights offerings.

Data by YCharts

GLU closed on June 3, 2022 at a share price of $17.10 and a NAV of $19.01, giving a discount of -10.05%. The share price is $1.10 higher than the fixed subscription price of $16, meaning that if one were to subscribe today, you'd only be getting new GLU shares at a -6.4% discount to the current market price of the fund.

Because of the fixed subscription formula, the value of the rights are strongly sensitive to how far above (or below) GLU is trading relative to the fixed subscription price of $16. It is important to note that if GLU declines below $16 by expiration date, one should not subscribe as it would be cheaper to purchase the fund on the open market. At that point, the rights would also become worthless.

When the rights first traded trading last week, GLU's share price was only around $0.50 higher than $16. This meant that the rights only had an intrinsic value of around $0.125. Yet, the price of the rights traded much lower than that (at around $0.03), meaning that the rights were trading far below their intrinsic value. As previously explained for other similar offerings, this is likely because of the risk that the rights would become worthless should the share price decline below $16.



Now, the converse is also true; should GLU's share price appreciate, the rights would become more valuable. We saw this happening last week; with GLU's price appreciating to over $17, the rights rose strongly in value as well.

At current pricing, the rights have an intrinsic value of around $0.275. This means that the rights are still significantly underpriced at their last close of $0.15. This ought to suggest that if one is bullish on the markets and on GLU specifically, then buying the rights here could be a potentially profitable strategy should GLU continue to rise. Importantly, we should expect the rights to rise towards their intrinsic value as the expiry date approaches, as long as GLU is trading comfortably above $16 by then.

The fact that the rights are still trading far below their intrinsic value suggests the upside and downside probabilities are asymmetric. Meaning, the market thinks that there's a greater chance of the rights becoming worthless than them exploding higher in value. This is expected because CEFs tend to exhibit negative price pressure over the rights offering period. In the case of GLU's offering which has a fixed subscription formula, we also have the risk of overall market movements to contend with as well.

The offering expires June 23, 2022. Should GLU be trading comfortably above $16 in the final days before expiry, we could take another look to see whether the rights are still discounted in order to potentially execute an arbitrage play.

About GLU

GLU is a global equities fund focusing on the utilities space. Its top holdings include National Fuel Gas Company (NFG), Swedish Match (OTCPK:SWMAF) (OTCPK:SWMAY), AES Corp. (AES) and NextEra Energy Partners (NEP).



GLU last closed at a discount of -10.05% and a market distribution yield of 7.02%, paid monthly. It uses 38% leverage and charges a baseline expense ratio of 1.39%.

Strategy statement

Our goal at the CEF/ETF Income Laboratory is to provide consistent income with enhanced total returns. We achieve this by:

  • (1) Identifying the most profitable CEF and ETF opportunities.
  • (2) Avoiding mismanaged or overpriced funds that can sink your portfolio.
  • (3) Employing our unique CEF rotation strategy to "double compound" your income.

It's the combination of these factors that has allowed our Income Generator portfolio to massively outperform our fund-of-CEFs benchmark ETF (YYY) whilst providing growing income, too (approx. 10% CAGR).


Income Lab

Remember, it's really easy to put together a high-yielding CEF portfolio, but to do so profitably is another matter!

Don't know what to do about CEF corporate actions?

Closed-end fund corporate actions such as rights offerings and tender offers present both significant opportunities and risks. We cover these regularly for members of CEF/ETF Income Laboratory, allowing them to profit or avoid losses.

Check out what our members have to say about our service.

To see all that our exclusive membership has to offer, sign up for a free trial by clicking on the button below!

This article was written by

Stanford Chemist profile picture
CEF/ETF income and arbitrage strategies, 8%+ portfolio yields

CEF/ETF Income Laboratory is a premium newsletter on Seeking Alpha that is focused on researching profitable income and arbitrage ideas with closed-end funds (CEFs) and exchange-traded funds (ETFs). We manage model safe and reliable 8%-yielding fund portfolios that have beaten the market in order to make income investing easy for you. Check us out to see why one subscriber calls us a "one-stop shop for CEF research.”

Click here to learn more about how we can help your income investing!

The CEF/ETF Income Laboratory is a top-ranked newsletter service that boasts a community of over 1000 serious income investors dedicated to sharing the best CEF and ETF ideas and strategies.

Our team includes:

1) Stanford Chemist: I am a scientific researcher by training who has taken up a passionate interest in investing. I provide fresh, agenda-free insight and analysis that you won't find on Wall Street! My ultimate goal is to provide analysis, research and evidence-based ways of generating profitable investing outcomes with CEFs and ETFs. My guiding philosophy is to help teach members not "what to think", but "how to think".

2) Nick Ackerman: Nick is a former Financial Advisor and has previously qualified for holding Series 7 and Series 66 licenses. These licenses also specifically qualified him for the role of Registered Investment Adviser (RIA), i.e., he was registered as a fiduciary and could manage assets for a fee and give advice. Since then he has continued with his passion for investing through writing for Seeking Alpha, providing his knowledge, opinions, and insights of the investing world. His specific focus is on closed-end funds as an attractive way to achieve income as well as general financial planning strategies towards achieving one’s long term financial goals.

3) Juan de la Hoz: Juan has previously worked as a fixed income trader, financial analyst, operations analyst, and economics professor in Canada and Colombia. He has hands-on experience analyzing, trading, and negotiating fixed-income securities, including bonds, money markets, and interbank trade financing, across markets and currencies. He is the "ETF Expert" of the CEF/ETF Income Laboratory, and enjoys researching strategies for income investors to increase their returns while lowering risk.

4) Dividend Seeker: Dividend Seeker began investing, as well as his career in Financial Services, in 2008, at the height of the market crash. This experience gave him a lot of perspective in a short period of time, and has helped shape his investment strategy today. He follows the markets passionately, investing mostly in sector ETFs, fixed-income CEFs, gold, and municipal bonds. He has worked in the Insurance industry in Funds Management, helping to direct conservative investments for claims reserves. After a few years, he moved in to the Banking industry, where he worked as a junior equity and currency analyst. Most recently, he took on an Audit role, supervising BSA/AML Compliance teams for one of the largest banks in the world. He has both a Bachelors and MBA in Finance. He is the "Macro Expert" of the CEF/ETF Income Laboratory.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

Recommended For You

Comments (5)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.