Sprott Physical Silver Trust Announces Follow On Offering

$PSLV has announced another follow on offering.  I’m told that the size is $ 200MM.

What this means for PSLV shareholders is that they should expect the premium to Net Asset Value (NAV): 7.22% as of tonight’s closing price -  to fall.    I have explained the reasons for this multiple times in prior posts:  when there are more shares outstanding, it means that you need more “investors” willing to pay a higher premium, and such “investors” get harder and harder to find as the number of shares outstanding increases.   That’s why you’re seeing PSLV trade down 3.5% after hours, even as silver trades slightly higher.

In the next few days, we’ll be able to approximate the price that Sprott’s Trust paid for its silver, and once again illustrate that paper and physical silver prices are not decoupling, contrary to the snake oil that the silver pumping blogs continue to try to push to their unaware readers.

The misinformation in the silver-blogosphere continues unabated, so I just wanted to take a minute to point one thing out for the silver-noobs who haven’t yet realized that most of what they are reading on this network of blogs which I refer to as the Silver Mafia is disinformation:   The $SLV – Ishares Silver Trust - like $PSLV, owns only fully allocated London Good Delivery silver bars.  It doesn’t own “paper,” it doesn’t own “COMEX futures,” it doesn’t “lease or lend its silver,” and it’s not “missing silver due to short sales.”

One big difference between SLV and PSLV, contrary to what you’ve been told, is that SLV’s inventory is audited by one of the most respected names in precious metals – Inspectorate – the very same firm that audits James Turk’s Goldmoney.   Sprott’s Physical Silver Trust, however, is audited by Ernst & Young.  Yep – the very same Ernst & Young that audited Sino Forest…. and Lehman Brothers...

I know that group think and confirmation bias are probably easier to roll with than reality, but please understand the facts here.  I know that you want to believe that SLV owns “paper” silver, and that it will imminently collapse in a blaze of glory as “real, physical” silver vaults to $1000/oz, but please – start questioning the nonsense you’ve been told.   SLV’s inventory is audited, and the certificate is visible online.  You’ll have to trust Sino Forest’s auditors – who apparently couldn’t deduce hundreds of thousands of acres of non-existent timberland – when you’re analyzing PSLV’s inventory.*

Anyway, PSLV is going to trade down on Thursday, again, relative to SLV – you can rationalize it to yourself however you want.  Reality will probably be a more profitable approach to portfolio management though.

 

related:

Misinterpreting PSLV’s Premium

Kid Dynamite’s posts with the word “Sprott” in them

-KD

Disclosure: sadly, no positions in $PSLV (or $SLV).  I am somewhat perturbed with myself because I expected such a secondary offering to be coming shortly, and I had mentioned this trade (short PSLV, buy $SLV, try to make a few percent if PSLV announces a secondary offering) to several friends as recently as last night, but I didn’t put the trade on yet.

 

* this is not to say that I don’t think that PSLV has the silver which they claim to have – only to point out yet another amazing irony resulting from tales fabricated by the Silver Mafia Blogs.

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