The Gabelli Multimedia Trust has moved to significantly bolster its capital resources by amending an existing distribution agreement. The closed-end fund can now issue and sell up to 17 million additional shares of its common stock. Management states the primary objective is to enhance financial flexibility for pursuing future investment opportunities.
Strategic Timing and Share Pricing Mechanism
A key factor behind the decision appears to be the fund’s current market valuation. The trust’s shares recently traded at a notable premium to their underlying net asset value (NAV). As of mid-February, the NAV per share was $3.70, while the market price reached $4.04. This represents a premium of 9.19%.
The new shares will be sold using an “at-the-market” equity offering program. This method provides the flexibility to issue shares intermittently based on market conditions and capital needs. Strict pricing guidelines are in place: all sales must occur at a price at least equal to the prevailing NAV per share, plus a selling commission. This commission is capped at a maximum of 1.00%.
Issuance Details and Shareholder Impact
Prior to this expansion, the fund had already sold approximately 6.96 million shares under the previous agreement. Consequently, roughly 10.03 million shares remain available for issuance under the newly enlarged program.
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Should the remaining shares be sold in full under conditions similar to the recent premium, the trust could generate net proceeds of about $40 million. While this influx of capital benefits the fund, existing shareholders face potential dilution of their ownership stakes.
Despite the equity offering, the fund’s distribution policy remains unchanged. Management has reaffirmed its annual dividend rate of $0.88 per share. This dividend continues to be paid to investors in monthly installments.
In recent trading, the stock closed at $4.00 this past Friday, marking a modest single-day decline of 1.11%.
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