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Sprott Physical Silver Trust Falls 5% After Follow-On Offering

tlydon@globaltrend.com (Tom Lydon)

Sprott Physical Silver Trust (PSLV - News) fell more than silver ETFs on Thursday after its manager announced a follow-on offering to buy more bullion.

Sprott Physical Silver Trust was down 5.4% in premarket trading Thursday.

The iShares Silver Trust (SLV - News) , an $8.5 billion ETF that invests in silver bullion, slipped 1.5% before the bell.

Sprott Physical Silver Trust fell harder than silver prices because its premium to net asset value narrowed after the follow-on announcement late Wednesday.

Although it trades on NYSE Arca like most ETFs, the Sprott silver product has some unique wrinkles.

First, it’s structured as a closed-end fund, so it can see premiums and discounts to indicative value based on demand for the shares.

PSLV traded at a premium of 7.2% on Wednesday, according to Morningstar. However, that premium was set to narrow Thursday as the follow-on offering will increase the number of shares outstanding.

The silver trust is managed by Toronto-based Sprott Asset Management.

The silver fund is unique because large shareholders are able to redeem shares on a monthly basis in exchange for silver bullion.

PSLV is also listed on the Toronto Stock Exchange.