Author's note: This was released as part of the Weekly CEF Roundup released to CEF/ETF Income Laboratory members on July 18, 2022, with certain numbers updated.
From the press release:
Gabelli Global Utility & Income Trust Rights Offering Concludes Raising $9.4 Million
June 30, 2022 08:30 AM Eastern Daylight Time
RYE, N.Y.--(BUSINESS WIRE)--The Board of Trustees of The Gabelli Global Utility & Income Trust (NYSE American: GLU) (the “Fund”) announces the completion of its transferable rights offering (the “Offering” or “Offer”). Preliminary results indicate that the Fund will issue approximately 591,000 common shares, resulting in gross proceeds to the Fund of approximately $9.4 million, assuming the over-subscription privilege is exercised. Pursuant to the Offer, the Fund issued one transferable right (a “Right”) for each share of common stock held by shareholders of record (record date shareholders) as of May 12, 2022. Holders of Rights were entitled to purchase common shares by submitting four Rights and $16.00 for each common share to be purchased (the “subscription price”). The Offer expired at 5:00 PM Eastern Time on June 29, 2022 and the Rights no longer trade on the NYSE American. Preliminary results indicate that the Fund received total subscriptions of approximately $9.4 million (including over-subscription requests and notices of guaranteed delivery). The new common shares will be issued on or about June 30, 2022.
This was a transferable 1-for-4 offering which had an ex-rights date of May 11, 2022. Like other Gabelli rights offerings, and unlike most other CEF rights offerings, GLU's subscription price is fixed, at $16.00. What this meant was that should GLU's share price have declined below $16 at expiry, investors should have not subscribed as it would have been cheaper to buy the fund on the open market.
The managers realized this too, and with GLU trading at around the $16 level in final week of the offering (original expiry date was June 23, 2022), the managers decided to extend the offering by one week, to June 29, 2022. After all, if no one subscribed, the fund wouldn't be able to achieve its goal of growing its AUM.
One week later on the new expiry date of June 29, 2022, GLU closed at a share price of $16.05. Perhaps fearing a further drop in the markets (which would render taking part in offering even more unattractive), the managers decided not to postpone the offering again and allowed it to expire. Hence, subscribers to the offering who paid $16 for new GLU shares received a very slight discount of -0.3% to the market price of the fund at expiry. Better than nothing of course, but personally not a risk that I would have wanted to take myself.
The offering raised approximately $9.4 million, with 591,000 common shares issued. This will increase the fund's share count by around +11%, which is short of the maximum +25% increase that could have happened if the offering was fully subscribed. These numbers also suggest that 40% of rights holders subscribed, which is a surprisingly high number given how close GLU's share price traded to the subscription price at the close of the offering. Gabelli should be sending thank you cards to those subscribers!
Additionally, given that the NAV at expiry was $16.95, this offering will lead to a slight dilution of the NAV/share of fund, on the order of around -0.6%. We can see that the NAV of the fund was possibly adjusted on June 30, the date that the new shares were issued, as GLU's NAV fell by -1.24% on a day where both US utilities (Utilities Select Sector SPDR Fund (XLU)) and global utilities (iShares Global Utilities ETF (JXI)) were positive.
In summary, GLU's offering wasn't hugely successful for managers, but it could have been a lot worse. A higher-than-expected number of subscribers participated in the offering given the razor-thin discount to the market price at expiry. The fund will overall grow its share count by +11% with slight dilution occurring at the NAV/share level.
Our goal at the CEF/ETF Income Laboratory is to provide consistent income with enhanced total returns. We achieve this by:
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).
Remember, it's really easy to put together a high-yielding CEF portfolio, but to do so profitably is another matter!
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
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.”
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.