RE:Termination date / prospectus verbiage Here's a basic version. DFN is currently trading below NAV so in the unlikely event of termination, the preferreds get the issue price ($10) and the commons get whatever is left over which, at the moment, covers all shareholders buying today. However, the NAV is constantly changing so anytme in the future the situation could change where the NAV drops so that in the unlikely event of fund termination there could be a shortfall to cover the commons even at today's strike price. If the NAV fell to $10, the commons would get 0.
The reason for any discount to NAV (or premium) comes down to whether the commons will receive a monthly distribution or not. Lately DFN has missed a few distributions, hence the discount. That is about to change and a premium will soon come back in play to own the commons.
Note, I use the word "unlikely" event because Quadravest will want to keep the fund going for as long as possible from the fees they capture. In any case, however, no guarantees exist for common shareholders.
punjabi416 wrote: Hi,
Can someone please help me understand the verbiage surrounding the termination date from the prospectus document?
I am a Class A shareholder and my understanding of the wording of Class A Shares (b) "on or about the termination date, to pay the holders of class A shares at least the original issue price of those shares" is that when the fund closes I would receive at least $15 despite the market value (which is currently ~$4).
I am positive I might be missing something here as why would investors not flock to DFN at current levels if they're guaranteed $15 in the event of a *potential* termination.
Appreciate the help!