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Sprott Prices PHYS Follow-On At $11.25, No Lack Of Demand
As noted yesterday, due to massive demand for physically backed gold ETF (or just one as the case may be), and due to the massive spread between NAV and FV of his gold trust, Eric Sprott announced a follow-on offering of 18 million trust units, with a 2.7 million overallottment. The offering has now priced less than 24 hours after the offering announcement; we doubt lead manager Morgan Stanley had any problems finding investors for this particular offering. This means at least 6 metric tonnes of gold will soon be bought in the open market.
Reuters press release:
Sprott Physical Gold Trust said on Wednesday it had priced a follow-on offering at $11.25 per unit, pulling the price of its traded units down by 7.1 percent to sit just above the offer price.
Sprott Asset Management, known for its gold-focused mutual and hedge funds, launched the trust -- essentially an exchange-traded fund -- in February to cash in on increasing investor appetite for direct investment in the metal.
The trust raised $443 million in the initial offering, and the secondary offering will result in gross proceeds of $243 million, rising to $279 million if an over-allotment is exercised.
"The trust intends to use the net proceeds of this offering to acquire physical gold bullion," Sprott said in a statement.
Gold was at $1,212 an ounce on Wednesday. The metal is up more than 10 percent so far in 2010, as Europe's debt troubles have increased gold's appeal as a hedge against inflation and economic uncertainty.
The trust's units were down 88 Canadian cents at C$11.55 on the Toronto Stock Exchange.
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No disrespect to Mr. Sprott, who is only making the most logical play available, but trust no paper!
Buy PHYSICAL gold only!
When the exchanges breakdown, good luck getting your "gold".
BUY PHYSICAL GOLD BITCHES!!
I am Chumbawamba.
I don't understand why people don't want to hold their own gold.
Because I can make twice as much on a daily basis holding leveraged derivatives. UGL FTW.
Apples and oranges. UGL isn't comparable to PHYS.
Doesn't matter. At the end of the day, you're still going to need dollars to buy things, and those dollars will be worth something, even if, as in Weimar/Zimbabwe, we experience hyperinflation and the value is diminished by a factor of a thousand or a million.
And UGL, timed properly, will significantly increase the % change in dollars I receive for every % change in the value of gold.
What good is it when in the end the instruments you hold will be worthless?
This is not a practice run. This is it. Don't fuck it up. The rest of your life depends on the moves you make today.
I am Chumbawamba.
Because my IRA doesn't let me hold physical gold. At least not in a manner I've been able to figure out.
Me neither, so I cashed it out entirely and put it all into physical. Fuck the IRS.
But there is a way to do it "legitimately" (if you're a pussy):
1. Form an LLC.
2. Give yourself all the shares.
3. Invest your 401K funds into your LLC.
4. Take those funds and buy physical gold.
5. END
I am Chumbawamba.
Chum,
Dude, agree w/you 100%, and even if it's held in Canada, the tentacles of the monster, if it can bust the SWISS door.........
This will be a picnic in the park.And, do NOT think for one fricken second, they WILL NOT do it.....BANK IT!
You make some money, you buy some assets. You make some money, you buy some assets.
I'll repeat againt: you make some money, you'll make some assets.
ML, Spend it quick................
Probably because the average Joe doesn't have one grand lying around to buy a full ounce. If you can't have a gold bar some gold dust will do I guess. Though I have to agree with Chumbs: physical >>> paper.
Silver, bitches!!!
Because it takes effort to buy physical rather than a few keystrokes to buy digital paper. Because most are uneducated on how to buy authentic gold. Because TV says its easier to buy digital ETF. Because TV talking heads make you sound like a gun totin bible clingin hick if you buy phys gold. Because its something new and different to hold physical investments, people are hesitant to change.
Many don't realize the difference between holding physical metal and holding paper. When I ask my friends if they own gold they say, "yes, I have shares of GLD."
It's not a matter of them having the financial wherewithal but rather, the issue lies with their understanding of what GLD is versus a Gold Eagle.
Chumba is right. Even though PHYS actually (?) has real gold in stock, it is in Canada.
I want my gold here with me. So obvious. Buy physical only.
Hey guys, let's not forget same basics of survival. Keeping your entire wealth in one spot, all eggs in one basket, isn't exactly risk free! Just tell us where you live, and maybe somebody here can help remind you real quick.
I mean, you've already got everything else you own stored in your home, including your home.
And, if you can't even trust doing business with Sprott who takes care to use very clear wording about your physical metal in his ETF, then who can you trust?
Gold is only 6% of what I own.
I also have 2 investments overseas (all terribly legal).
I am armed. I have a tiny food hoard.
Diversification.
I am not ready yet, but working slowly towards it. I need more food, ammo and a more useful skill set.
Do,
In this enviro, you think 6% is enough?.
Will it replace your fiat savings, or very close to it?.Will it replace your dollars, if their just devalued by 50%?.
Some say 10-15% max, as of now, I say own enough to replace your entire net worth................
GG, here is 100% ALL IN..........Sprott basically is, along with many others.
Maybe he gots some silver too?
As money comes in, I take some of it and buy gold (also sliver and platinum depending on what is there). I would like to be at a 10% or more, but that will take some time.
Re my paltry 6%, I know only ONE person who is at or above that amount.
Ponder learning how to can food. You increase your useful skill set, and in the process store up food.
Canned food, will be a logical barter item in almost any location. I am sure you are already standardizing your ammo approach but if not... consider getting a rifle and a hand gun that shoots the same ammo.
So, an example being .22 High Standard pistle with a .22 10-22 rugar rifle.
Thank you for advice re canning food. Acquiring a good skill set is going to take some time, I think slowly on matters like that.
I am half way standard on guns & ammo:
9mm Luger for Mr. Beretta
7.62 x 39 for Mr. Kalashnikov
I am trying to round up some buddies to go shooting tomorrow. For each round I fire, I buy 2 or 3...
Save your brass, and learn to reload. Which gives you another skill set that is valuable. If you can invest in the necessary equipment to reload your brass, your ammo reserves will last indefinately, when you consider usage rates. You can also reload brass for other people, and trade ammo for other supplies.
Absolutely agree. There is no 100% safe way to store gold, so it makes sense to split your stash. Keeping it at home may reduce the risk of it being confiscated, or scammed, but on the other hand your home is far more vulnerable to burglary/theft, fire, natural disasters than a secure vault.
In addition, and irrespective of whether gold is safer in your home, it is possible that you (and your family) may be LESS safe with gold in your home. Which is more important?
Sabre,
"In addition, and irrespective of whether gold is safer in your home, it is possible that you (and your family) may be LESS safe with gold in your home. Which is more important?".
Got WEAPONS?, almost as important as got GLD..........not just one,proficient in use?.and all the fodder each needs to be fed?.
Taught wife how to shoot, how to at least LOAD for you?.
Having Gld in the house, covers a lot of ground, IN the house, or on your property?.
Doomers are so entertaining.
Yes, we are. On the other hand our entertainment is not too expensive. Very little downside.
Indeed.
Just be sure to not remind me you said this when you're standing in my bread line.
I am Chumbawamba.
From previous Sprott "Bend over Shareholders, We're Diluting You" Announcement thread:
on Wed, 05/26/2010 - 07:19
#373956
I bought PHYS yesterday at $12.33, I wake up diluted 10% . Can someone explain why Sprott is a good deal?
by Temporalist
on Wed, 05/26/2010 - 08:53
#374145
It was risky to buy on an day of options expiration. You will recoup your losses soon enough. Gold is up today...it will continue on it's bullish trend of the past 10 years.
Basically you bought $1200 gold for $12 in some ways (of paper). Hold it or buy more when it dips to average down
by Pegasus Museon Wed, 05/26/2010 - 08:44
#373998
Yes. Listening to several Sprott interviews he came across as a straight shooter.
I wake to find I, along with every other PHYS investor, have been screwed by this dilution (Follow On Offering).
I'm selling my PHYS and buying physical gold.
This is really bad. What a disappointment. You can't trust anyone selling paper of any kind. Even the Canadian Gold Trusts that many people talk so highly of.
actually, the above is not correct, the deal is actually accretive not dilutive to shareholders. The deal was done at more than 10% above NAV, thus NAV will increase on the deal, not decrease. Sure, if you paid a 23% premium to get in, you are pissed by today's decline. But if you are in for the long-term, you want Sprott to do accretive follow-ons all day. Your 23% premium is not going to continue forever anyway.
Brian,
Actually, while the deal may be accretive to someone, it certainly was not to me. My unrealized gain from having invested in PHYS was cut in half by virtue of Sprott's Dilutive Follow-On Offering yesterday.
Had I known this offering was going to occur I could have liquidated my entire PHYS position at price of $12.50/unit (closing price on 5/25/2010), waited until after the Follow-On Offering was announced, and then repurchased my entire original position (at $11.50/unit; today's opening price) and had extra cash (my entire realized profit from the trade) available to buy additional units of PHYS. I would not have been diluted. I would not have been robbed of half my unrealized gain.
Unfortunately, what Sprott did to me (and all his other investors) by virtue of this Follow-On Offering was to reduce our entire PHYS holdings by $1.00/unit. He screwed us. He stole 8% of our paper gain. Poof. Overnight. It's gone.
So while someone may have profited from this deal, it certainly was not me nor the other investors that put their faith and confidence in Sprott and entrusted him with their money.
Edit: I also agree with Sweetwater's post below. I don't believe in coincidences. Sprott made recent appearances on King World News and on the Canadian BNN (Business News Network) which was hyped here on Zerohedge. Sprott was trying to entice as many "newbie" investors as possible -- at as high a price as possible -- to jump in an invest in PHYS before he pulled the rug out from under them with the Follow-On Offering. Sheep being led to the slaughter. ZeroHedge -- wittingly or not -- helped promote it. Not good.
Sprott certainly plays it both ways. He took his company public at the top of the resource bubble in 2008:
http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximize...
He's not in it for his investors. {sounds of shock in audience}
Well, buyer beware when paying a premium for any closed-end fund.
CEF is "only" at an 8.2% premium. Cheaper than PHYS even after the follow-on.
http://www.centralfund.com/Nav%20Form.htm
On the Toronto Stock Exchange there's the CGL ETF (recently converted from a C-E fund), which provides the "gold bar list" everyone wants:
http://www.claymoreinvestments.ca/etf/fund/cgl
Reasonably liquid for a Canadian ETF.
So having more physical gold available to you on demand is a bad thing?
Might I suggest you buy GLD instead, if you just want to track the metal price? Sure, they might not have any gold, but you don't run the risk of them buying some and "diluting" your shares.
And the good old lesson is to always check the discount/premium to NAV, as with any other ETF before entering!!!!!!
When I eat a meal, I like to actually do it. There are many other things that I actually do as well. (no comments, you!) I do not understand why people want to let someone else hold their money, regardless of how "good" that person is. Absolute power corrupts absolutely. If 10^6 people have their money 10^6 people can decide what to do. When 1 person holds 10^6 people's money, there is only one link that needs to be broken.
Actually, I do get it. They positively want to get ripped off. Well, ok.
To literally hold your metal, you'd have to walk around with it in your hands all day. Silly.
Storing all of your gold in your home is also extremely risky, yo. Are you just looking to get robbed blind?
Yeah, that's why I leave it on the window sill next to my front door, and I have a sign on my front lawn that states the following:
ATTENTION THIEVES:
THAR BE GOLD IN THESE QUARTERS
SEARCH YE NO LONGER
COME INSIDE AND RAID ME GOLD!
THE DOOR IS UNLOCKED.
I like risk. I eat risk for breakfast, then shit it out before lunch and have some more!
I am Chumbawamba.
I'm actually speaking as someone who doesn't even own a home and has to come up with creative ways to hide metal in a rental. Fortunately, it's a old, big house with lots of loose wood paneling. Still, I spread the risk offsite and overseas.
Spreading the risk is a good idea. My PMs are in 2 locations where I live.
Just be creative in hiding it, sounds like you have a lot of places that would work just fine.
Overseas is good too. As long as you can reconcile the risk of losing that, because after all, it is, overseas. Put some overseas if you can afford it, while you still can.
You have not been screwed. The demand is there and he took advantage of it. I too have a bunch, and I added a bunch more this morning. So if it is down for a few days what is the big deal. This is a long term investment for all of us as we know on this site what is coming down the road.
Have full faith and trust in Sprott. Full Position.
denninger is on a rampage against sprott. having been wrong -- consistently -- on gold over the past four years, he's frothing at the mouth about the decline in PHYS today. without full info tothe readers why it declined....
so what, all my dealers are completely out of physical. PHYS is a helluva lot better than GLD....I took 1k units.
Demand almost ended JPM"s Comex fun and games yesterday. Having watched this crap for years now...it was an incredible performance by the bulls....in the past I saw JPM utterly destroy the metal in twenty short minutes. they worked all week to bring it down -- silver too -- and made it by CENTS. PENNIES>
and they lost silver.
so.....denninger......keep crying .... you made a bad call.....own it.
Denninger... eh, wake me up when he wakes up from his delusion that the market would be perfect if everyone follows the rules. Fact is, and we here at ZH know this to be fact, the market is a massive fraud. He cries on and on yet needs to realize no one (truly big) goes to jail and that GS, JPM, the Fed etc will never be held accountable and found guilty for their obvious criminal activities.
I don't care how "correct" he is on whatever issues, the guy, in the main, is a complete and total horse's ass.
He can never admit he's wrong (which is often) and as a result he'll still be screaming about the rigged markets long after everything's collapsed and he's left standing amidst a pile of burning debris that used to be his home before the rioters swept through.
I've witnessed some utter jack-asses before but never have I come across someone so stubborn, to the point of rendering themselves literally stupid.
I know it'll be cruel to laugh at him in his face, considering all that Floridians have been through these past several years, and will be going through in the next few, but I will gleefully fly my golden plane out to Niceville and get close enough to his face that he'll get a full blast of my garlic breath as I let out a hearty guffaw.
I am Chumbawamba.
+ $1210 LOL.
The Chumba is a man to watch. He is forming his own state, backed with a hard currency. And now we learn he has a gold plane. What's next, tungsten bullets with gold plating?
As Gordon_Gekko said here at ZH: Everything will be left behind when the gold mothership takes off.
You guys are missing the point...
PHYS is for the ubber-rich that have millions to hide.
Chumba is correct as well. Physical in hand for the average Joe is a must. However, if you are trying to invest $5 or $10 million in physical, you don't want to put it in a safe in your house or a safety deposit box. You are better off having it stored in a secure vault in Canada - thus... PHYS.
My two cents...
JFC
2nd that.
Finally, the voice of a reasonable mind.
And I'm not just saying that because Jesus was pictured as my prophile icon, for those who might've noticed.
jesus,
YOU WANT nothing in a Saftey deposit box, not cash, not jewelry, NADA,ZILCH...............esp PM's .
if you have a million or two .
use the insured vaults of brinks . but own the gold .
go to the gold coin guy,, tell him you want to get the goods ,, he willline it up at a good price ,, deal , the in one scoop .. tslly ho to brinks ,
this gold willbe robbed is a poor excuse for not buyin g gold // the car will be stolen as it sits in plain site on the driveway.
amd if youstored some cash on hand it could be gone
be creative get some gold shut your mouth , and the gold will be fine , when you got some dough ,, buy,
if not enough to coiver the oz.. them grab some silver eagles ,,
Alas, I am nowhere near having a million or two.
Above posters have a great point if you do have a large amount to invest, then PHYS or Brinks do look like good bets. Gets some diversification too.
Diversification... One of my favorite words.
dumpster! I like silver eagles too. I also like (love?) platinum eagles. Hope all is well for you!
Isn't when the public finally gets in the definition of a market top? Just sayin... I make the observation that it takes two years since the first call by someone of relevance of an asset bubble till the eventual blow up...
wawa,
Public isn't IN, Europeans getting there, Chinese, never legally could before, other than that, NO ONE I talk to is talking gold, and have no clue what is going down..........
I have friends getting ready for retirement, and have 100% of their life savings in SHITE PAPER,,,,,,,,,,,,,
I tell them, DO NOT trust your life's work, and savings to paper!.
They think because in their lives it's always been safe, SAFE is guaranteed............NOTHING is guaranteed in this life.
Not even our next heartbeat.
I can't believe Karl wrote such a uninformed piece. I mean, it would have taken a minute to check for news and to see the information on the secondary offering.
http://market-ticker.denninger.net/archives/2352-A-Tale-Of-Irrational-Premium-And-Risk-PHYS.html
When he is good he is very good, but when he is bad he is horrid.
Well, its a human failing thing I think. Once you are wrong, it is tempting to keep doubling down and try and gain converts, rather than admit it.
http://jessescrossroadscafe.blogspot.com/2010/05/why-financial-engineers-fear-and-even.html
For some reason he has an axe to grind against gold, and it clouds his judgement on a consistent basis whenever he addresses anything gold-related.
Interesting link. I would be careful about arbing that difference tho. Kind of sounds like a negative basis trade a few years ago. (Ask DB how that one worked out.)
Just because a given spread is irrational does not mean that it won't become more irrational. In this case, I always wanted to regress the PHYS NAV premium against the number of posts in the intertubes about gold conspiracies, ETF fractional gold lending etc. Just read the posts in this thread about PHYS vs. GLD. They do not support the conclusion that the premium will dissapear any time soon.
dennenger is macho arrogant... my feeling he is trolling for some sort of public voice ,,
and to be pro gold is to be seen by many to be a wrong move .
he is in this thing for the jollys , and he goes far to show the accounting tricks .. and balance sheet stuff .
did you see his smiling mug as he facebooked a few in a room coat tie , and smiling facade.
and the most tacky remark ,, you cant have sex with gold .
i wonder if this guy with his pushy ways even has sex. . a big turn off.
He claims to have a daughter from a failed marriage, but he's never clarified if she came about from adoption or IVF. This being Denninger, it could possibly have happened through asexual reproduction as well.
I am Chumbawamba.
Prolly the mailman.
Sprott's fund has exposure to unallocated accounts via custodians...
something doesnt feel right even though he's an advocate of real money..
no counterparty risk should be acceptable to anyone from here on out...
I read the PHYS prospectus.
Positives:
- 100% allocated physical gold
- stored outside US in Canada
- units may be redeemed for physcial gold
- provisions for redemption if markets closed
Negatives:
- redemptions limited to once per month
- if redeeming for physical must take gold bar ($400,000) increments
All in all I still prefer Central Fund of Canada (CEF). Anyone prefer PHYS over CEF, and if so why?
review...
http://www.rapidtrends.com/2010/05/21/afe-counter-party-risk-scale/
CEF is a mix of gold and silver, so they are hardly comparable. Silver has a much different beta than gold.
Spicer family also has GTU. I have owned that.
CEF and GTU allow for NO redemption that I know of. So how is it so different from GLD and SLV? It is a paper claim.
Sure GLD might lack backing, but if you are holding long term and worried about default, well maybe CEF and GTU have an edge, and that is reflected in their premiums. But you cannot take possession as far as I can tell, ever.
PHYS carries a routinely higher premium because of that redemption. It will be interesting to see how the fund handles its long term tax situation on the sales for redemptions. The premiums expand and contract against themselves, allowing for some buying and selling opportunities. Comparing them to each other is useful for information purposes but not all that meaningful if they are 'stable' in relation over the longer term. PHYS obtains a better premium because it is 'more like' physical gold with that redemption.
Disclosure: Right now I own both, because they are different for different purposes.
But both in my mind are for trades only. If you want to own physical gold, then own it, and not something else.
Thanks.
I prefer mix of gold/silver. Seems a rational diversification. (CEF people do offer 100% gold fund but I felt liquidity was too low).
I understand all the arguments for holding physical instead of CEF. I also know that while gold is the best investment today there are no sure things in life. I can visualize some scenarios where you would need to get out of gold quickly. For example, US comes clean, acknowledges their problem, cuts deficit, and increases interest rate. Not likely, but possible.
There is nothing wrong with it. I own it too. Its 'different.'
I bought it on their own secondary offering contraction and the gold silver option smack. PHYS is being compressed now by its own offering.
If I really want to ride the silver beta dragon, there are feistier (and higher risk) ways to do it when it is moving. But its a tough trade sometimes.
I have assumed that when collapse occurs, silver may do better or worse than gold, but both will be excellent places to preserve wealth. Do you feel gold will always do better than silver during collapse?
Owning precious metals in small amounts is fun. Larger amounts go into the bank (yes I know they can close the banks). If I was rich enough to have 50 or 100 or 400 oz bars I would have to think twice about where to store it.
A hole in the backyard; your gold in a plastic bag, in a plastic bag, in a burlap sack; cement on top and around it, with nails and other worthless metallic debris to fool the detectors; a few inches of dirt covering the cement.
Sleep well at night.
P.S. Have a sledgehammer open to break in case of emergency.
P.P.S. DON'T FORGET WHERE YOU BURIED IT, MORAN!
I am Chumbawamba.
GPS it...............and hide the co-ordinates.
IK,
Have you asked your bank is it LEGAL for you to store it?, Cash also?.
Also, Banks saftey deposit boxes are routinely pilfered, and not by the IRS.
Yes, hold physical. Of course hold physical. However, for those tied in a 401k, right now is a good time to invest in gold, and you missed your window to sell at a top and pocket enough to pay for your tax. You could have foreseen the last "pullback", or SHAKEDOWN as I like to call it, and sold at DJ 11,200. If you did not, well, get ready for gold to go up a lot and very quickly. So if you want in on this next run, and you are tied up in a 401k, and you do not think it will all collapse (which Chumba does, and I agree with him fully), then go ahead, and gamble! Owning minors is a great play, but just like any corporation, they are subject to price manipulation, disasters, and strikes.
Gold is money, and who do you trust with your monie...hopefully no one other than loved ones.
Mr. LH,
401k's and IRA's are fixing to be basically confiscated, or you will lose your ass two way's, devaluation/default, or NO withdrawals until your 65-67, and if you die, the balance will go to the Feds.
Just like Social Insecurity...............anyone still in 401k's, is gambling big time.IMHO
Trad IRA's, are at east held 2 Blks away, and you can cash those out in minutes.
Not wait 2-3 weeks(if lucky) to get a Fund check.
You are correct in everyway.
Just don't let anybody know about it.
If you dig a big enough hole in the backyard you can keep them with your gold.
Owning gold miners in general has been a horrible way to particpate in the gold rally. They're high beta stocks and get decimated in market downturns. In the collapse of 2008 to 2009 the GDX collapsed from 50 to 17. Gold was still at $700. I've been following the biggest miners for a decade and they suck as investments to date.
Agree on Denniger. Like his work but he is Wrong on gold. And, no, you do not have to be uber rich for PHYS. Just another part of a diversified gold position. I have physical gold locked in the safe here, miners and PHYS> That is how I diversify. Got some silver too. I think Sprott is as honest as we can expect. It is not all perfect, even here.
Tyler Durden --Eric Sprott Great job on your Miami Beach Pump & Dump Boiler Room Hustle. I always wondered how ZH paid the bills. What was the commission for your almost full disclosure, 2 part video scam the day before the dilution?
I got slapped around good this morning. I bought PHYS, but was in a hurry, not paying attention and entered a "market" order instead of limit. Whammo, got some expensive PHYS. Someone somewhere is laughing.
Anyway, have an IRA an can not get the money out, so this looked like one of the better of poor options. What I dont understand is the 10% drop the night before. If this is reduction of the premium in this fund, can we expect more of the same? How do we know when PHYS is a safe buy, with such fluctuations in premiums. I compared normalized price of PHYS to GLD and spot gold since the inception, and PHYS has significantly outperformed. If we buy now, are we setting ourselves up for a 20% haircut.