They estimate about $8.50 termination value.
Yes, it's an almost foolproof short, however almost impossible to borrow shares. I understand it's on some kind of 'no short' list.
Some folks claim they've been able to borrow shares though.
Actually there is one BIG risk.
Let's say you short at $100 and you are right that it will pay $60 distributions and terminate in 4 years.
But in the meantime the price could rise to $130 again and your borrowed shares could become unavailable to borrow (for example if sold to someone holding in a cash account) and you would have to buy back the shares at $130. Then maybe you couldn't get any more shares to short. So you'd lose. This is a significant risk, giving the difficulty of finding shares to short.
Tks, but there's no margin interest, I borrowed and sold the stock. I now have cash in my acct.
I don't know about borrowing fees, good point. Don't know if, or how much.
On the distis, that's why I said buy MSB, for the first few years, you pay off the GNI distis with the MSB distis.
Now, you will run a little short, GNI's disti rate is much higher than MSB's, for obvious reasons. So there will be some outflow.
This is all academic, I won't jump into that pool, but I bet it's a good play.
WHX up today, it's just as much a sure thing as GNI. Over the next 30 or 90 days, you can make money, but over the next 3-4 yrs, a lot of money will be lost.
It's like Fannie/Freddy, those are worthless, but people still trade them. One day, the cards will disappear, and someone will lose a lot of money. Those 2 have a combined mkt cap of over $1B, and that's what will be lost.
I always assumed that the money deposited into you acct ( on the sold shares ) worked just like a loan and had an interest meter running on it of at least Libor plus a spread.
What keeps a con artist from shorting shares, and then withdrawing the funds and heading for Antigua or anyplace without a extradition treaty with the US?
When you short, you get money deposited into your acct, there's no other costs other than paying the distis.
The real cost could be if there's a run up, and your broker decides he needs to get that borrowed stock back from you, so you have to buy it back when he says so.
That happened to me once. Way back in another life, i shorted a stock called Coleco, I'll never forget it, got short in the 20's, it went BK! So I tried shorting others, and then ran into the call for the stock. Didn't like that too much!
How about this, short GNI, use all the proceeds to buy MSB. if GNI were to run up, wouldn't MSB too? Wouldn't the distis from MSB cover the short distis from GNI?
I'll probably never even try this, but it's worth the discussion.
WHX the same story...
What about the cost beyond the dividends to borrow the shares? Wont there be a meter running on that too? I only play long, never short but you could be onto something.
I would look at undistributed cash and what the trust says about remaining assets at wind up too. But you could be right that there is a long term arbitrage from folks buying yield without understanding what they are buying. That is what GNI looks like from my vantage point.
Dmurdock, you are absolutely right, although each trust has its own definition of the "end". BPT trust has set the "end" when the production of oil will not produce enough revenue the cover the formula to calculate the royalty. The formula is in the bylaws of the trust.
With MSB the end has nothing to do with the production of iron ore. The trust will cease to pay royalty on the 25 anniversary of the death of the last named person in the bylaws. My understanding the date is in April 2015. The trust asset will revert to Conoco who own the nine.
Trust are not stocks but units and not dividend but distributions. Keeping the name straight help me to understand that it is a trust.