Re: Capital Gearing Trust – PR Newswire Announcement, Tuesday, 21st September 2023.
Subject: Transaction in own shares - see ...
https://www.investegate.co.uk/capital-gearing-trust-plc--cgt-/prn/transaction-in-own-shares/20230221172427PB458/“On 21 February 2023 Capital Gearing Trust P.l.c. (the “Company”) bought 73,000 of its own Ordinary shares of 25p to be held in Treasury at a price of 4,850 pence per share. The Company’s issued share capital now consists of 26,580,263 Ordinary shares, of which 73,000 shares are held in Treasury. Therefore, the total number of shares with voting rights in the Company is 26,507,263.”
This is indeed a rare announcement. The last time the trust had cause to buy in its own shares was 12th March 2020, at the very start of Covid lockdown timeline, when global equity markets literally fell off a cliff. One needs to scroll back to September 2000 to find further Capital Gearing “transaction in own shares” notices. Though, to be honest, as a close watcher of how Personal Assets, Capital Gearing and Ruffer perform relative to each other, I was expecting this easing off in buyer demand to happen sooner or later.
Since the start of the year the share price of Capital Gearing has been gradually drifting lower at a faster rate than the NAV, moving from a 2% premium to a 1.5% discount in the process. This following a near 36-month period that saw relentless market demand for Capital Gearing shares resulting in the number of shares in issue to rise from 10,878,172 (on 2nd January 2020) to 26,580,236 (on 20th December 2022), of which 73,000 are currently being held in Treasury. That’s an increase by a factor of just short of 2-and-half times. Having seen how this film likely plays out several times before, after any extended period of expansion will follow a period of consolidation. This is the reason
why trees don’t grow to the sky – and Capital Gearing is no exception.
First enacted back in 2015, and near identical to that operated by Personal Assets, Capital Gearing’s closely monitored premium-discount control mechanism has never been truly two-way tested in the hard light of day. Rather, its function over the years has been to drive the demand for the trust’s shares in the secondary market. Barring any change in investor sentiment, I will be interested to see how effectively the discount control side of the process now performs if apparent signs of consolidation continue, causing previous strong investor demand for Capital Gearing shares to subside for any length of time.
In the spirit of full disclosure I have been a Capital Gearing Trust shareholder for a number of years via a SIPP.