I have own shares of UTG for a number of years in my IRA account. The last time they had a RIGHTS offering was circa 072012. At that time one RIGHT was added to my brokerage account for every share I owned. The RIGHTS shares were traded under the symbol UTG-RT and they had a price that changed with the fund price. The brokerage account seemed to drag their feet in getting the RIGHTS shares posted into my account, and every day I waited seemed to cost me money as I watched the value of the RIGHTS shares drop. I ended selling my RIGHTS shares on 072315 for 0.141 per share. I could have bought more at the discounted price but instead chose to exercise the sell choice. I used most of the proceeds to buy more of UTG anyway, I felt I could better control my purchase price. Since I don't have to pay commissions I felt that it was irrelevant as to whether I did it this way of buying them directly.
I'm also not sure if I would have been able to buy them through my brokerage account but may have had to buy the directly from the Reaves Fund people. To me this would have created more of a paperwork nightmare, especially since they were in my IRA. In the end, the RIGHTS offering seemed to be like getting one more monthly dividend equivalent, however it also diluted the value of the shares.
Sentiment: Strong Buy
"I'm also not sure if I would have been able to buy them through my brokerage account..."
They were tradeable for that offering in 2012, no? Trading on the stock exchange? If so you would have been able to buy them as you buy stocks, bonds, options, etc. That was for your ira brokerage account where i presume you could access it directly online and not depend on your broker to make your trades for you.
401k type was the type account at issue at the beginning of this thread and on that one i'm not sure if he/she has the same access to account options. I pretty much doubt it. Should receive the offer and instructions from the administrator just he/she would for an ira account, and would have to work it through them, not directly dealing in the market. But again, best to check directly with the administrator, not here, for the answer to the question.
"...can't even get a straight clear answer from the administrator!"
Lol, understood. There really should be no problem on something at this level though. It's a simple will you get the rights and have the opportunity to either exercise them or sell them, or not. I can't see why a 401k holder wouldn't. Though it may not be that simple if there's no cash available to exercise and buy more shares, though same would go for an ira, or something else i can't think of. So i'll change that to a should be simple.
Based on the Rights ratio, etc is there any way to forecast the dilution? Does this mean at least a 5% haircut: "...The subscription price per common share will be determined based upon a formula equal to 95% of the reported net asset value or market price per common share, whichever is lower on the Expiration Date (as defined below)..."
"...forecast the dilution?"
Yup for the # of shares that will be outstanding presuming fully subscribed. Nope, i'm not gonna do it. Won't help you determine the share price anyway since it's a cef and the nav will be good for only their holdings' value the day the transaction's a done deal. If you're looking to get some idea of what the share price might do, maybe looking at the history of the last offering, the trading several weeks leading up to it and several weeks after, would help give you some kind of basis on which to contemplate. Then again it might not.
How do we get the NAV for UTG in Yahoo? I'm assuming it's higher right now than the market price but I just want to check. I used to be able to get this in Yahoo but I'm old and I've forgotten how.
To get the NAV type into the Yahoo Finance ticker symbol search box: XUTGX. Or.. go to CEFConnect, the web site. There's a lot more information there beyond the daily NAV.
This might be helpful to others, from the last offering, note the "average":
DENVER, August 9, 2012 – Reaves Utility Income Fund (NYSE MKT: UTG) has established a subscription price of $24.41 per common share (“Share”) in connection with its previously announced rights offering (“Rights Offering”), which represents 95% of the reported market price per share, based on the average of the last reported sales price of a Share on the NYSE MKT for the five trading days preceding the August 8, 2012 expiration date (the “Expiration Date”).
Thanks much for the history. I presume today was the ex-rights day given friday's the day of record. Any idea if i'm correct? Sure looks it given today's drop. Tia.
I went back and was able to derive the 24.41 from 2012 data. So, doing the same for current dates gives subscription price of: 0.95 x (27.0+28.49+28.60+28.45+29.25)/5 = 26.94 .
The actual subscription price will be based on the closing share price for the 5 days preceding the Expiration Date which will probably be 12/11/2015 rather than the ex-rights date which you used.
In 2012, 08/08/2012 was the Expiration Date, the ex-rights date was around 07/03/2012.
As I understand it, anyway.
"...which will probably be 12/11/2015 rather than the ex-rights date which you used."
I think they came out with the 5 days just the other day, and it's earlier than the 12-11 you noted. Though i could be wrong, i'm doing it from memory, not from looking it up again.
The ex-rights date has nothing to do with the subscription price. The rights are assigned to the record holder on 11-19. That i do remember for sure. To be the record holder you would have to own the stock as of close of business 11-16. Anyone who sold shares yesterday sold them without the rights accompanying the shares. That means value lost to the buyer, the estimated value of the rights. That theoretical loss of value was deducted by the market yesterday if i've got the ex-rights day correct. Just as the market theoretically reduces the value on ex-dividend day.
Guesswork's involved because no one yet knows the true value of the rights once the discount takes effect because no one knows what the 5 day average price will work out to be. You should be able to get some idea of how much the market estimates they're worth by seeing how much the rights are trading for now. Take that value, deduct it from the closing share price the day before ex-rights day, and you should have at least a decent estimate of what the true effect of yesterday's closing price was, a gain or a true loss. Remember, yesterday's seller, if yesterday was ex-rights day, retained the rights and is still able to sell them and keep that money. Same as ex-dividend. The seller on ex-divi date, if he/she had owned the shares at close the day before, gets the dividend and gets to keep it.
The rights prospectus is available on SEC's EDGAR -- not on the fund's website yet that I saw.
The Rights are transferable and will be admitted for trading on the NYSE MKT Equities (“NYSE MKT”) under the symbol “UTG RT” during the course of the Offer. The Fund’s common shares are currently listed, and the new common shares issued in this Offer will also be listed, on the NYSE MKT under the symbol “UTG.” On November 13, 2015, the last reported net asset value per common share was $28.64, and the last reported sales price per common share on the NYSE MKT was $28.60.
The Offer will expire at 5:00 p.m., Eastern Time, on December 11, 2015, unless the Offer is extended as described in this Prospectus (the “Expiration Date”). The subscription price per common share will be determined based upon a formula equal to 95% of the reported net asset value or market price per common share, whichever is lower on the Expiration Date. Market price per common share will be determined based on the average of the last reported sales prices of a common share on the NYSE MKT for the five trading days preceding the Expiration Date.
Rights holders may not know the subscription price at the time of exercise and will be required initially to pay for both the common shares subscribed for pursuant to the primary subscription and, if eligible, any additional common shares subscribed for pursuant to the over-subscription privilege, at the estimated subscription price of $27.21 per common share and, except in limited circumstances, will not be able to rescind their subscription. Rights acquired in the secondary market may not participate in the over-subscription privilege.
"The Rights are transferable and will be admitted for trading on the NYSE MKT Equities (“NYSE MKT”) under the symbol “UTG RT” during the course of the Offer."
The rights when issued closed at 50 cents yesterday. They had traded as high as about 63 cents monday.