The Central Gold Trust was pressured today in response to its new unit offering from the existing shelf prospectus. The price declined 3.67% from yesterday's close with gold down $7.10. The total placement will be $285 million.
The premium is now low enough to make one an interested buyer, all things being equal, if there is an optimistic outlook for gold.
I have not quite calculated the 'greenshoe' on this offering as I am otherwise occupied today, but it might involve shortselling ahead of the offer as is customary and explained here.
Press Release
CENTRAL GOLD TRUST
For Immediate Release to Canada News Wire and U.S. Disclosure Circuit
TORONTO, Ontario (June 16, 2010) - Central GoldTrust of Ancaster, Ontario announced today that it has entered into an underwriting agreement with CIBC World Markets Inc., as lead underwriter, and Credit Suisse Securities (Canada), Inc. (the “Underwriters”), under which the Underwriters have agreed to buy and sell to the public in Canada (except Québec) and in the United States under the multijurisdictional disclosure system, 5,730,000 Units of Central GoldTrust.
The Underwriters have been granted the right to increase the size of the offering (the “Right”) by up to an additional 1,000,000 Units, exercisable in whole or in part, at any point prior to 4:00 p.m. (EST) on June 16, 2010. The offering will be made under an initial prospectus supplement to Central GoldTrust’s US$800,000,000 base shelf prospectus dated June 8, 2009.
The purchase price of U.S. $48.90 per Unit is expected to result in gross proceeds of approximately U.S.$ 280 million, prior to the exercise of the Right.
Substantially all the net proceeds of the offering have been committed to purchase gold bullion for settlement at closing, in keeping with the asset allocation provisions outlined in Central GoldTrust’s Declaration of Trust and the related policies established by its Board of Trustees. Any additional capital raised by the offering is expected to assist in reducing the annual expense ratio in favour of all Unitholders of Central GoldTrust.
Closing is expected to occur on or about June 23, 2010.
