The special situation we’ll look at today is simple, so this writeup will be short.
We’re dealing with a publicly traded closed-end investment company trading at a persistent discount to its NAV. That, in and of itself, is nothing unusual. Discounts exist for closed-end funds for all sorts of reasons: poor liquidity, uninspiring performance, high expenses, unfavorable tax treatment, or simple market indifference. In most cases, the discount is the story of the stock. Either it narrows over time or it doesn’t, and investors decide whether the carry is worth the wait.
But what makes this situation interesting is the structure around it and what appears likely to happen next. The company is very small, the stock is thinly traded, but the underlying holdings are all deeply liquid, diversified across >40 positions, and could be exited in short order.
Over the past three years, insiders have completed multiple tender offers below NAV that steadily increased their ownership, and they now control >90% of the shares. And in just the past month, they’ve taken two significant steps that clearly point toward a privatization, with the final push being a short-form merger.
That could happen this year, and perhaps before July, putting the potential IRR at ~85% using today’s marked-to-market portfolio (taking the market risk).
The company’s name is…