Earlier we reported that Sprott had sold $35 million worth of PSLV, which caused many to panic that the precious metals guru had indicated the market top in the market. Well, as it turns out and as he just told the Globe and Mail “We haven’t lost our enthusiasm for silver.” Quite the opposite...
So why the sales? “Every dollar of money that was raised by selling shares of [the Trust]... was reinvested in silver or silver equities,” he said.
While silver’s price per ounce has soared in recent months, “silver shares have not done as well, which is almost shocking in a way, and it looked like there were opportunities in either getting some premium on PSLV shares and buying silver or buying silver equities.” The sales were made at an average price of about $21, up from their $10 IPO price about six months ago.
But that doesn’t mean Mr. Sprott is abandoning his trust. He says he still holds around 25 per cent of the total trust units between his funds and his charitable foundation.
As for future public offerings following the IPO, he says he is sticking to a promise he has already made. “There will not be an offering that negatively impacts the premium on the PSLV,” he said.
Sprott is not the first to observe the harsh push on silver equities. As we noted some time ago, metals are outperforming equities by a ridiculous margin, which is why anyone who has to have a connection with capital markets (like an advisor) would be foolish not to take advantage of this relative mispricing. Which by the way is massive. As the chart below shows, while SILV is up 42% YTD, the SIL ETF is actually negative for the year! All Sprott is doing is taking profits from the upper line and reinvesting them in the lower one, once again proving that relative value compressiona/divergence trades are the only ones that make any remote sense under a centrally planned regime.