If you listen to the conference call regarding the rights offering, the Reaves representative (don't remember his name/title) definitely states that December 11th is included in the subscription price calculation. That's one of the reasons that I eventually conceded that my original $23.99 calculation was wrong and the $23.55 was correct.
The $23.55 is likely correct. The $23.99 is calculated using trading days from December 4th thru December 10th, inclusive. Some of us calculated it that way due the prospectus reading that the 5 trading days prior to the expiration date would be used. As the "expiration date" was actually defined as a time on the expiration date and that time was after the market close time, December 7th thru December 11th should (probably) be used in the calculation, as you did.
I understand your reasoning and think that it is very likely correct.
Unless one observes that "Expiration Date" is defined as both a date and time (rather than just a date), one reasonably (and apparently incorrectly) assumes that the "5 trading days preceding" that date wouldn't include that date.
Anyway, thank you for the explanation. Sorry that I overlooked the definition connection.
I revisited the Reaves filings on the SEC website this morning and re-checked the November 17th prospectus. It does read:
"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.".
There were no later amendments or filings on the SEC website (that I could find) that would alter that.
The press release from Reaves (available on their website) is worded the same as the prospectus.
I did listen to the first few minutes of the replay of the conference call (a link is available on the Reave's website) . The Reave's representative conducting the call does indeed state that the days included in the calculation "are the five trading days up to and including, December 11th". That may not be an exact quote, but very close.
I did try to find the Seeking Alpha quote you provided, but couldn't. I don't know if that quote is from an article where the author should have verified what is being written or from a comment where somebody may have just assumed that is the way the prospectus is worded after hearing the conference call, without actually verifying it.
The subscription price won't be altered much regardless of which way they calculate it. But, still Reaves shouldn't be saying one thing in writing and another thing orally, especially without ever clarifying in writing what they do mean.
So, I don't know for sure which way it is. My guess is that the Reaves person conducting the conference call made a mistake.
126.25 / 5 = 25.25
.95 * 25.25 = 23.99
Assuming no transcription or arithmetic errors.
I believe it's if the NAV price at the expiration date close is below the prior 5 day MARKET PRICE average, then .95 times NAV is used as the subscription price; otherwise .95 times the average of the prior 5 days market price close is the subscription price. Since market price is now about 15% below NAV price, the NAV price is not likely to be used.
"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). Market price per common share will be determined based on
the average of the last reported sales price of a common share on the NYSE MKT for the five
trading days preceding the Expiration Date."
I don't think that you are ahead of yourself; expiration date is tomorrow, but the days used in the calculation are the 5 market days preceding expiration.
As far as "trounced" is concerned, that was another guy in another thread, not me.
I calculated it a few minutes ago when today's price was at $24.60 and used that value for today. Taking the .95 into account, I came up with a purchase price of $23.95.
"The rights exercise is going to dilute NAV"
I'm not saying that you are wrong, but I look at it somewhat differently.
The way i see it is that this rights offering while obviously increasing the number of outstanding tradable units, effectively creates a NAV unit (both old and new units) that contain perhaps 75% utility stocks and 25% cash -- depending on how effective the offering turns out to be.. Now, if going forward from the rights offering utility stocks fall in price, the cash in the NAV unit will buoy up the NAV; but if going forward utility stocks rise in value, the cash will be a drag on returns. That's only true until Reaves gets the cash deployed, of course.
The way i looked at the 2012 rights offering was that I had cash in my brokerage account earning nothing and with the favorable utilities outlook at the time, I may as well transfer that cash to Reaves via the offering because they could likely deploy it better than i could. Don't know if I should look at it the same way this time or not.
I do think there is potential for share price dilution (or at least price depreciation) because the supply of trading shares are being increased at a time when demand for the shares is at best unknown.
Actually, a simple Google search using something like "bankrupt oil companies 2015 list" will come up with quite a few. Here's an excerpt from a "thestreet" September article:
Nineteen oil and gas companies have fallen into bankruptcy in the past year or so. Endeavour International was the first big one to file, in October, after struggling under a pile of debt and worsening prospects, and the case drags on, despite expectations that it would exit quickly. Endeavour was followed by other good-sized companies like Quicksilver Resources (in March), Sabine Oil & Gas (July) and Hercules Offshore (August). Smaller companies like Saratoga Resources (June), Dune Energy (March), American Eagle Energy (May), Cal Dive International (March) and Boomerang Tube (July) also filed.
Companies that have already hired restructuring advisers, which may lead them into the bankruptcy courts, include Vantage Drilling (VTG - Get Report) , RAAM Global Energy (which has debt coming due Oct. 1), U.S. Shale Solutions, Paragon Offshore (PGN - Get Report) , Midstates Petroleum (MPO - Get Report) , Swift Energy (SFY - Get Report) , Venoco and Energy XXI (EXXI) .
Lucas Energy (LEI) warned in July that if it couldn't secure financing to drill its oil and gas wells in Texas, it might be forced to file for bankruptcy protection. Earlier this month, it did manage to snag a $2.4 million line of credit from Silver Star Oil and an amendment of its senior secured note to October of next year, but worries linger.
Observers are also concerned about Halcon Resources (HK) and SandRidge Energy (SD) , which have done distressed debt exchanges recently, as well as Magnum Hunter Resources (MHR) , Goodrich Petroleum (GDP) , Resolute Energy (REN) and Rex Energy (REXX) .
Avista Capital Partners-backed Sidewinder Drilling also appears to be in trouble, with Moody's giving it a negative outlook last month on worries it would struggle to se
Just a clarification on Fidelity accounts. I just became aware of this because of conflicting (and not well worded) online letters from Fidelity in my account. I called Fidelity and was told that December 3rd, today, is the last day that the rights may be sold. However, December 10th, at close of business is the last date that the rights may be exercised (at Fidelity).
If it makes a difference as to what you are going to do, you may want to verify this yourself. But, I'm going to wait until December 10th to decide whether or not to exercise the rights.
If you allow the rights to expire, (i.e., neither sell nor exercise your rights), the rights will definitely be worthless at expiration at 05:00 pm, December 11, 2015.
You may choose to sell your rights anytime prior to expiration. Right now, as I write this, it looks like the best price that you could get is 11 cents per right.
You may choose to "exercise" your rights anytime up to the expiration time/date. If you choose to do that, then for every 3 rights you own, you may may purchase one share (sometimes called an unit) of UTG at a price equal to 95% or the average closing price for the 5 trading days prior to December 11th. (The purchase price could also be 95% of the Net Asset Value of a share of UTG at close on December 11th, if that is lower; but, that is probably not likely.)
If you do exercise your rights, I believe your broker will require payment of $27.21 per UTG share purchased at the time you notify the broker that you wish to exercise your rights. The $27.21 is an estimated price and if the actual price turns out to be less, then the difference will be refunded. I don't know if the normal 3 day settlement period for trades is in effect for this or not -- can't remember.
You may also choose any combination of the above.
The symbol Yahoo seems to be using for these rights is "UTG-RI".
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.
The only tax form would be the broker provided Form 1099-DIV. (If you sell shares, then there would also be the Form 1099-B reporting the sale).
UTG is a closed-end mutual fund rather than a publicly traded limited partnership (which is typically the cause of tax time headaches).
The notes do trade according to whatever a buyer is willing to pay and a seller is willing to accept. The indicative and/or intrinsic value is the estimated value of the underlying note which originally started with a value of $25 and has been subsequently adjusted for price changes in the high yield index and the subtraction of UBS management and financing fees. The use of the indicative value is to aid in determining what you may want to buy or sell it for. Sort of like a CEF may not trade at it's net asset value; although I think notes do typically trade closer to their indicative value than CEFs trade to their NAV.
Incidentally, mgerner seems to be correct in that a buy order for 300 CEFL shares executed at 16:00:00 ET and that buy order was apparently a market order and lower priced sell orders had already been pulled.
I tried to post the link, but it is not showing up probably due to Yahoo's posting restrictions. So, just google "UBS CEFL" and the first thing that shows up should be "ETRACS ETN - ubs etracs", click on that and then the "Distributions" tab.
From IRS 2014 Publication 17 (i.e, trade dates determine holding period for stocks (& ETNs), rather than settlement dates:
"Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made.
You are a cash method, calendar year taxpayer. You sold stock on December 30, 2014. According to the rules of the stock exchange, the sale was closed by delivery of the stock and payment of the sale price in January 2015. Report your gain or loss on your 2014 return, even though you received the payment in 2015. The gain or loss is long term or short term depending on whether you held the stock more than 1 year. Your holding period ended on December 30."
During the past year, the ex dividend dates have all been between the 8th and the 11th of the month. The UBS news releases announcing the dividends for the month have been on the 5th of the month (or very near to it).
I posted the following comment on one of the Yahoo news articles (really an attorney advertisement news release, I guess). Just wondering if I'm seeing things correctly or missing something.
"I don't see how any investor who sold CASY shares prior to the accounting/tax error announcement could claim damages due to the error, if anything it would seem that they would have benefited from the error.
For those who owned shares at the time of the announcement (like me) how can suing ourselves give us any relief because current (and future) shareholders are the ones who will pay any damages awarded (in part, to ourselves) plus litigation costs for both sides. The possibility of impending litigation will only serve to drive the share price down and result in more financial damage. At this point, it seems to me that it is the class action law firms eroding share price and causing investor financial damage, rather than the original CASY error.
I'd prefer to sue these ambulance chasing blood suckers. "