PORTLAND, Maine - ASA Gold and Precious Metals Limited (NYSE:ASA), a non-diversified, closed-end investment fund, has announced the adoption of a limited-duration shareholder rights plan, effective immediately and set to expire on December 20, 2024. This move comes as a defensive strategy against Saba Capital Management, LP's significant accumulation of ASA shares and subsequent proxy contest to influence the company's board composition.
The rights plan, similar to one previously adopted by ASA's board on April 26, 2024, aims to prevent Saba Capital from gaining further control without offering a premium to shareholders. Saba's current stake in ASA is approximately 17.02%, and the board includes two directors proposed by Saba and two from the prior board.
Under the plan, shareholders will receive one right per ASA common share held as of September 9, 2024. These rights will become exercisable if an entity acquires 15% or more of ASA's outstanding common shares. Shareholders already owning 15% or more are grandfathered at their current ownership levels but are restricted from acquiring additional shares that would increase their stake by 0.25% or more.
Should the rights plan be triggered, the Rights Plan Committee may allow each right holder, except the acquiring person, to purchase one common share at $1.00 per share or to exchange each right for one common share on a cashless basis. Further details will be disclosed in forthcoming SEC filings.
ASA, which focuses on long-term capital appreciation through investments in the precious metals sector, has been advised by Merk Investments LLC since April 12, 2019. The company emphasizes that its shareholder rights plan is not designed to prevent takeover offers but to ensure fair treatment for all shareholders in such events.
The rights plan also comes amid a lawsuit filed by Saba against ASA and certain board members, challenging the legality of such plans under the Investment Company Act of 1940. While the case is pending, the committee intends to engage with the board, Saba, and other shareholders to explore future strategies for the company.
This initiative is based on a press release statement and aims to safeguard shareholder interests without deterring potential offers that may benefit the company and its investors.
InvestingPro Insights
As ASA Gold and Precious Metals Limited (NYSE:ASA) navigates through its ongoing contest with Saba Capital Management, the financial metrics and market performance of the company provide a broader context for investors. With a market capitalization of $377.5 million and a compelling P/E ratio of 6.01, ASA stands out as a potentially undervalued investment opportunity in the precious metals sector.
Despite a slight decline in revenue over the last twelve months as of Q2 2024, with a -1.7% change, the company has maintained a remarkable gross profit margin of 100%. This indicates that ASA has effectively managed its cost of goods sold, translating into strong gross profits of $2.36 million. However, it's important to note that the company has faced an operating income adjustment, with a reported loss of $3.37 million during the same period, which could be a factor of consideration for cost management and operational efficiency.
An InvestingPro Tip that stands out for ASA is its consistent dividend payments over the past 18 years, showcasing a commitment to returning value to shareholders. The dividend yield currently stands at 0.2%, with the last dividend having an ex-date of May 3, 2024. Additionally, ASA has been profitable over the last twelve months, which could reassure investors of the company's financial health amidst market challenges.
Investors may also find the stock's recent performance noteworthy, with a large price uptick of 41.26% over the last six months. This surge is reflected in the year-to-date price total return of 30.09%, indicating strong investor confidence and market momentum for ASA.
For those seeking a deeper dive into ASA’s financial health and future prospects, InvestingPro offers additional tips and comprehensive analyses. Currently, there are a total of 5 InvestingPro Tips available for ASA, which can be accessed for more detailed investment strategies and insights at: https://www.investing.com/pro/ASA.
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