GLU - GLU: Rights Offering Unexpectedly Decent

• GLU's rights offering has concluded.
• A higher than expected number of rights holders subscribed.
• Subscribers obtained only a thin discount to the subscription price.

Author's note: This was released as part of the Weekly CEF Roundup released to CEF/ETF Income Laboratory members on July 18, 2022, with certain numbers updated.

The Gabelli Global Utility & Income Trust's ( GLU ) rights offering has concluded . We first discussed this offering when it was announced in a previous Weekly CEF Roundup (public link here ).

From the press release :

Gabelli Global Utility & Income Trust Rights Offering Concludes Raising $9.4 Million

June 30, 2022 08:30 AM Eastern Daylight Time

RYE, N.Y.--( BUSINESS WIRE )--The Board of Trustees of The Gabelli Global Utility & Income Trust (NYSE American: GLU) (the “Fund”) announces the completion of its transferable rights offering (the “Offering” or “Offer”). Preliminary results indicate that the Fund will issue approximately 591,000 common shares, resulting in gross proceeds to the Fund of approximately $9.4 million, assuming the over-subscription privilege is exercised. Pursuant to the Offer, the Fund issued one transferable right (a “Right”) for each share of common stock held by shareholders of record (record date shareholders) as of May 12, 2022. Holders of Rights were entitled to purchase common shares by submitting four Rights and $16.00 for each common share to be purchased (the “subscription price”). The Offer expired at 5:00 PM Eastern Time on June 29, 2022 and the Rights no longer trade on the NYSE American. Preliminary results indicate that the Fund received total subscriptions of approximately $9.4 million (including over-subscription requests and notices of guaranteed delivery). The new common shares will be issued on or about June 30, 2022.

This was a transferable 1-for-4 offering which had an ex-rights date of May 11, 2022. Like other Gabelli rights offerings, and unlike most other CEF rights offerings, GLU's subscription price is fixed, at $16.00. What this meant was that should GLU's share price have declined below $16 at expiry, investors should have not subscribed as it would have been cheaper to buy the fund on the open market.

The managers realized this too, and with GLU trading at around the $16 level in final week of the offering (original expiry date was June 23, 2022), the managers decided to extend the offering by one week, to June 29, 2022. After all, if no one subscribed, the fund wouldn't be able to achieve its goal of growing its AUM.

One week later on the new expiry date of June 29, 2022, GLU closed at a share price of $16.05. Perhaps fearing a further drop in the markets (which would render taking part in offering even more unattractive), the managers decided not to postpone the offering again and allowed it to expire. Hence, subscribers to the offering who paid $16 for new GLU shares received a very slight discount of -0.3% to the market price of the fund at expiry. Better than nothing of course, but personally not a risk that I would have wanted to take myself.

The offering raised approximately $9.4 million, with 591,000 common shares issued. This will increase the fund's share count by around +11%, which is short of the maximum +25% increase that could have happened if the offering was fully subscribed. These numbers also suggest that 40% of rights holders subscribed, which is a surprisingly high number given how close GLU's share price traded to the subscription price at the close of the offering. Gabelli should be sending thank you cards to those subscribers!

Additionally, given that the NAV at expiry was $16.95, this offering will lead to a slight dilution of the NAV/share of fund, on the order of around -0.6% . We can see that the NAV of the fund was possibly adjusted on June 30, the date that the new shares were issued, as GLU's NAV fell by -1.24% on a day where both US utilities (Utilities Select Sector SPDR Fund ( XLU )) and global utilities (iShares Global Utilities ETF ( JXI )) were positive.

In summary, GLU's offering wasn't hugely successful for managers, but it could have been a lot worse. A higher-than-expected number of subscribers participated in the offering given the razor-thin discount to the market price at expiry. The fund will overall grow its share count by +11% with slight dilution occurring at the NAV/share level.

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