Sprott Physical Silver Trust PSLV Brings Out Its Follow On Offering

As predicted.  The cash reserves of the Trust had fallen to less than $350,000 by my estimates.

Let's see how this affects the price of silver.

According to a message to the Sprott Private Wealth clients:

PRICING: will be between $13.10 to $13.75 USD, which is a 5.6% to 10.0% discount from last trade, but a 12.3% to 17.9% premium to the latest Net asset value per unit.

PSLV closed regular trading today at $14.56, but traded as low as 13.33 after hours.

And as anticipated those buying the Trust at those 30 percent premiums will take about a ten percent hit on this offering.   The premiums must have been indicative of a short squeeze and not of a shortage in physical silver per se.   And the premiums were clearly at the outer bound of the historic range.

Of particular interest will be the allotment if any to the underwriters and at what prices. I would be surprised if deliverable silver has not already been discussed and arranged if this is going to be a deal in size.  The trust may be attractive once again at a more normal premium according to historic standards.

Press Release
Sprott Physical Silver Trust Announces Follow-on Offering of Trust Units
TORONTO, Jan. 17, 2012

(NYSE: PSLV) (TSX: PHS.U), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP, announced today that it has launched a follow-on offering (the "Offering") of transferable, redeemable units of the Trust ("Units").

The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering.

Under the trust agreement governing the Trust, the net proceeds of the Offering per Unit must be not less than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering.

From a Message Sent to Clients of Sprott Private Wealth

Sprott Physical Silver Trust (TSX: PHS.U, NYSE: PSLV) is issuing new units via an overnight follow-on offering. Anyone interested, please get back to me by 7:30 a.m. EST tomorrow (Wednesday, January 18) with their order quantity. Details are below.

The offering is expected to be for between $250 - $350 million USD. Eric Sprott will be participating as Sprott Inc., the Sprott Foundation and related entities or clients will invest at least $45 million in the offering.

PRICING: will be between $13.10 to $13.75 USD, which is a 5.6% to 10.0% discount from last trade, but a 12.3% to 17.9% premium to the latest Net asset value per unit.

Please note for Canadian investors, you can purchase silver at net asset value by buying the Sprott Silver Bullion mutual fund. Silver is Eric Sprott’s top investment thesis and as such, most of you already hold a substantial amount of silver through his Funds. As at December 30, 2011, 24% of the holdings in Sprott Canadian Equity Fund were silver bullion and for Eric’s Canadian hedge fund strategies, silver bullion makes up between 29-33% of the long portfolio.

If interested in this offering, if you have any questions or if you would like to take any other action with your portfolio, please send me an e-mail or call me.

Gold Daily and Silver Weekly Charts

Gold and silver are back in sync with equities.

The miners are struggling here.

SP 500 and NDX Futures Daily Charts - Manhattan Melodrama

There is quite a bit of 'tension on the tape' despite its calm outward appearance and rangebound trade.

They will either break this out into a new phase of the bubble, or the market will take a dive. I do not think we are more than a week or two away from a resolution to this, but it could drag on until the end of March and the final reckoning over Greece.

Whatever happens, go with the flow, because the pent up energy could provoke quite a move in either direction.

Or even better, get out and stay away until the situation clarifies in Europe and the Mideast unless you are an active, professional trader.

As may recall, the film Manhattan Melodrama was made famous by the introduction of the previously unrecorded song Blue Moon but with a different set of lyrics. It was such an attractive meldoy that the studio brought the song out afterwards with the original lyrics and a classic was born.

It was also the last film seen by John Dillinger before he was gunned down outside a Chicago theatre in the company of 'the lady in red' by Melvin Purvis and his G-men.

SP Futures Intraday

Cynical trade on light volume.

Within a range and a longer term trend, the markets and the supporting commentary from the financial news demimonde are pure manipulation.

And it appears that the Fed was aware of this artificiality as early as 2004 when it allowed the global banks inflate a fraudulent housing bubble in the US and in Europe, and failed in its responsibilities as regulator in addition to managing monetary policy and employment.

The better to loot them all, my dears. The privileged few must have their due, and honest work with all its risk is not on their agenda.