What Does it Mean for Shareholders When Trusts Issue New Shares?

Woodford Patient Capital Trust announced it would be issuing new shares last week thanks to demand from investors. But how does this affect existing shareholders?

Jeremy Beckwith 17 August, 2015 | 12:13AM
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Jeremy Beckwith: So one of the most important features of investment trust, is that the share price is determined by buyers and sellers and the price at which they are happy to transact. This can be very different from the actual value of the assets within the investment trust. So what we've seen particularly with the Woodford Patient Capital Trust over the course of this year is that share price has gone up and up as everybody wanted to buy their shares at a much faster rate than the actual value of the assets inside the fund.

Earlier this week the share price got to be about 120p whilst the assets in the fund were only worth about 105p, so a very big discrepancy. So the Woodford Patient Capital Trust decided this week to sell more shares, because there is a lot of demand for them. So they were able to sell another large slug of shares at 115p.

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Jeremy Beckwith  is Director of Manager Research for Morningstar UK

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