RE: What's wrong with CTF? The problem is that if all warrants are exercised, then the NAV will plunge from the latest reported $5.14 all the way down to $4.52 due to dilution. Anyone purchasing units at $4.00 will be getting an 11.5% discount to NAV, not the current 22.1%. The discount is still very enticing, but keep in mind that management is clearly not acting in the best interests of unitholders, as evidenced by their issuance of warrants at such a massive discount to prevailing NAV. Also, keep in mind that these units have historically traded at about an 11% discount to NAV.
It appears that investors, including myself, are proceeding with caution despite what appears to be very good value.
What is fascinating is that management, in their blatantly obvious attempt at driving up the units above the exercise price, announced a partial redemption of five million units. This was highly disingenious as this will only amount to about 8% of all outstanding units if all warrants are exercised. Unsuspecting unitholders expecting to redeem all their holdings will almost certainly be disappointed as there is likely to be a flood of redemption requests. Not only that, but the NAV to which redeemers are entitled will be the diluted $4.52, not the current $5.14! Does management think we are fools?
Think about it: Units are being issued for $4.00 per unit via warrants, but being purchased at full NAV via redemptions! Management, of course, realizes that it is in their best interests to allow five million redemptions if it results in 30 million extra units on the market.
Personally, I wonder if all warrants will be exercised even if the units close out of the money (below $4.00). It seems irrational to exercise the warrants when plenty of units are available on the open market at a lower price, but these markets are often non-sensical. In fact, at the last conference call, it was apparent that some unitholders had already exercised their warrants.