Gabelli Healthcare & Wellness Fund (NYSE:GRX) is currently undergoing a transferable rights offering (GRX Rights - ticker: GRX RT) to raise additional capital for the fund. One right has been distributed to every GRX owner for each share held. The terms of the rights offering are that exercising 3 rights plus paying $9 produces 1 share of the GRX fund. Rights last traded at $.3856; $.3856*3 + $9 = ~$10.16. Shares of GRX are currently trading at $10.32, indicating a mispricing of $.16 (less transaction costs).
Unfortunately, GRX does not seem to be borrowable (even on Interactive Brokers, which generally tends to be quite good at this sort of thing), so there does not appear to be a current arbitrage opportunity - simply an opportunity to acquire shares in the fund for ~1.5% less than the current market place.
Investors looking to acquire shares in GRX would be relatively better off acquiring and exercising the rights; investors in tax-sheltered accounts who already own GRX could sell their shares and acquire/exercise the GRX rights to recreate their existing positions at a slight discount; finally, investors who already own GRX with a tax basis higher than the current price would likewise benefit from.
Additionally, current holders (who have been distributed rights already) should exercise the rights or see their proportional interest in the fund's NAV be diluted.
Disclaimer: This opportunity is probably only suitable for individuals who already own GRX shares or who are interested in immediately acquiring GRX shares. I have no real personal opinion about the fund, itself. However, for those readers who fall into one of the specific categories of people who could benefit from acquiring/exercising the rights, this could be an interesting opportunity to juice returns slightly.
This post does not constitute a recommendation to buy or sell any securities; all investors should do their own diligence and research, and buy/sell based upon their own convictions and investment needs.