Yes, it's about that, maybe a touch more with corporate overhead. I've never liked the notion that they use WMC (trading firm) to procure the pounds and get dinged on buying fees. Sprott should hire an internal trader but already have a contract with WMC.
Guy Keller (Tribeca) openly acknowledged he was playing the "sell SPUT just before it hits NAV" game himself, until he realized he was basically shooting himself in the foot since his book is long uranium equities, and has stopped playing it.
I'm glad he realized that. I'm sure there are others but that's the market. This raise is an interesting new potential wrinkle because if investors sense spot is getting particularly tight, they could be fine to raise at again at NAV, even at 2-3-4% discount. Of course, we don't know if this will happen again, but time will tell.
While Sprott will never publicly disclose, there is a short list of well known uranium funds in the space and wouldn't be surprised if some/all were involved.
So those that bought units left ~$1.7M on the table by buying at NAV instead of the open market. It still doesn’t make sense to me why they wouldn’t buy in the market? The volume of U.UN has traded over 1.75M 5 times this year and over 4M once in 2024. Yes it would have raised price closer to NAV but spread out over a number of days, it would have muted the effect. And increasing the price closer to NAV is equally if not better than sending a message that the U is not for sale. So weird.
The entire point of the transaction had one purpose: to get SPUT more cash for operating expenses so SPUT wouldn't have to sell pounds. If they had simply bought shares on the open market, it could have potentially moved SPUT's price up, but it wouldn't have solved the issue of SPUT running low on cash in the Treasury. By doing a placement by issuing new shares at NAV, SPUT tops up on cash so they no longer need to worry about potentially selling any uranium to fund the operating expenses.
My only theory that makes sense to me is - someone with a huge U portfolio thought that the damage to the spot (and thus equities) would be much larger if SPUT sold pounds, than the $1.7M they left on the table buy buying at NAV.
$25mm/yr opex seems excess, particularly when there is very little activity
They do hold 66.22M-lbs of U3O8, so, unfortunately, the carrying costs are just a reality of a commodity sequestering vehicle.
Extrapolate ~$2M per month carrying costs if they say it will last 12 months.
Great article by the way, another insight into shorting dynamics.
Yes, it's about that, maybe a touch more with corporate overhead. I've never liked the notion that they use WMC (trading firm) to procure the pounds and get dinged on buying fees. Sprott should hire an internal trader but already have a contract with WMC.
Guy Keller (Tribeca) openly acknowledged he was playing the "sell SPUT just before it hits NAV" game himself, until he realized he was basically shooting himself in the foot since his book is long uranium equities, and has stopped playing it.
I'm glad he realized that. I'm sure there are others but that's the market. This raise is an interesting new potential wrinkle because if investors sense spot is getting particularly tight, they could be fine to raise at again at NAV, even at 2-3-4% discount. Of course, we don't know if this will happen again, but time will tell.
Btw, wouldn't surprise me if Guy participated. He also hinted at this exact scenario many weeks before SPUT announced the raise...
Exactly. It's a brainscrewer now. "Should I sell close to NAV? Repeat the old game under new rules?" Cheers.
Who were the group of mystery investors ?
While Sprott will never publicly disclose, there is a short list of well known uranium funds in the space and wouldn't be surprised if some/all were involved.
So those that bought units left ~$1.7M on the table by buying at NAV instead of the open market. It still doesn’t make sense to me why they wouldn’t buy in the market? The volume of U.UN has traded over 1.75M 5 times this year and over 4M once in 2024. Yes it would have raised price closer to NAV but spread out over a number of days, it would have muted the effect. And increasing the price closer to NAV is equally if not better than sending a message that the U is not for sale. So weird.
The entire point of the transaction had one purpose: to get SPUT more cash for operating expenses so SPUT wouldn't have to sell pounds. If they had simply bought shares on the open market, it could have potentially moved SPUT's price up, but it wouldn't have solved the issue of SPUT running low on cash in the Treasury. By doing a placement by issuing new shares at NAV, SPUT tops up on cash so they no longer need to worry about potentially selling any uranium to fund the operating expenses.
My only theory that makes sense to me is - someone with a huge U portfolio thought that the damage to the spot (and thus equities) would be much larger if SPUT sold pounds, than the $1.7M they left on the table buy buying at NAV.
Yes, you are exactly correct! That's precisely what happened in our view.