Sprott Begins Selling PSLV Shares

It’s official – Eric Sprott has started selling the PSLV shares that his funds own.   This is not surprising, given that the PSLV Trust trades at a juicy premium to its Net Asset Value (in the neighborhood of 17% as of today).   From the filing, the updated ownership is as follows (my share change data and comment is in parenthesis):

As of the date hereof, the Investment Manager may be deemed to beneficially own 13,360,715 Units (prior: 14,971,815: sold 1,611,100 shares.  This category is a total of the other sub-categories)

As of the date hereof, Sprott Hedge Fund L.P. may be deemed to beneficially own 2,647,300 Units (prior: 3,288,300: sold 641,000 shares)

As of the date hereof, Sprott Hedge Fund L.P. II may be deemed to beneficially own 2,648,300 Units (prior: 3,329,200: sold 680,900 shares)

As of the date hereof, the Sprott Foundation may be deemed to beneficially own 4,982,115 Units (no change)

Other Sprott funds sold 289,200 shares – so you can see that the total share sales sum to the 1,611,100 shares in the Investment Manager line.

The majority of the shares were sold on April 21st (as detailed in the filing), which explains PSLV’s “odd” behavior on that day, where it drastically underperformed the price of silver.

Now – how about some questions:

1) Eric Sprott has been a vocal, unabashed bull on silver, saying in his most recent research piece; “We truly believe that this is the investment opportunity of a lifetime.”  If it’s the investment opportunity of a lifetime, one would stand to guess that Sprott is not lightening up his silver exposure, right?  He’s probably replacing the PSLV that he sells with silver bullion – which doesn’t carry the hefty premium to NAV that PSLV shares do.

2)  How did Sprott execute these orders?  The majority of the shares were sold on 4/21/11.  The filing breaks down the fills into two separate lots – one lot (466,000) at $22.2143 and the larger lot (800,000) at $21.8908.  Yahoo Finance shows that the PSLV range for that day was $21.92 – $22.50 – yes: Sprott’s fill is below the low of the day, which really probably just means that he sold at the low on that day.  It looks to me like at least this 800k was sold as a block right around when the stock opened, (a risk bid where the broker commits capital and buys the entire lot at once from Sprott.  He’d call up and say “what’s your bid for 800k PSLV” and get a price on the whole lot), and that the filing average price is net of commission (ie, Sprott paid 3c per share, getting to the $21.8908 average price), and then the Broker probably sold the stock over the course of the day to liquidate their position.

I’ll keep my eyes open for futures sales of $PSLV by Sprott, and eagerly wait for the day that he announces a secondary offering of PSLV shares and adds bullion to the Trust, diluting the costs of running the trust, and increasing assets under management – which is what any rational Trust manager whose trust is trading at a massive premium to NAV would do – unless of course that manager was trying to sell his own shares first and capture the premium…

-KD

postscript: from reader YukonCornelius, on how many will react to this news:

 


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