ASA Gold and Precious Metals Fund Adopts Limited-Duration Shareholder Rights Plan

Rhea-AI Summary

ASA Gold and Precious Metals Limited (NYSE:ASA) adopts a limited-duration shareholder rights plan to protect against significant share accumulation by Saba Capital Management, LP, aiming to prevent creeping control and safeguard long-term value for all shareholders.

Insights

Financial Analyst

Implementing a shareholder rights plan, commonly known as a poison pill, is a defensive strategy used by companies to fend off potential hostile takeovers. The adoption of such a plan by ASA Gold and Precious Metals Limited can have significant implications for shareholder value and market perception. From a financial perspective, the Rights Plan may signal to the market that the board is committed to protecting the company's autonomy and preventing undervalued acquisition attempts.

However, it can also be perceived as a deterrent to future investments, especially if institutional investors see it as a barrier to beneficial acquisitions. The plan's effectiveness in preventing creeping control without discouraging beneficial takeover bids is a delicate balance that will require continuous evaluation. It is essential to monitor how this move affects ASA's stock liquidity and trading volume, as these factors can influence the overall market capitalization of the company.

Moreover, the grandfather clause and the 15% threshold for triggering the Rights Plan are crucial elements. They maintain existing shareholder rights while preventing further dilution through unwanted share accumulation. It is vital to analyze the potential impact on the company's share price, as the Rights Plan could either stabilize or create volatility depending on investor reaction.

Legal Expert

The adoption of a limited-duration shareholder rights plan introduces several legal considerations for ASA and its stakeholders. This strategy is often scrutinized for its alignment with shareholder interests and corporate governance principles. The legal implications hinge on the plan's structure, specifically the terms under which rights are exercisable and the conditions that trigger the dilutive effect of these rights.

Legally, the company must ensure that the Rights Plan adheres to regulatory requirements and fiduciary duties owed to shareholders. The plan's expiration date of April 29, 2024, provides a temporal boundary, which suggests that the board is aware of the need to balance immediate defensive measures with long-term shareholder rights and corporate strategy. Additionally, the legal precedent set by such actions can influence future corporate defense mechanisms and the interplay between company boards and activist shareholders.

For stakeholders, the key legal takeaway is the plan's potential to alter the dynamics of control and the board's ability to negotiate in the event of an acquisition attempt. The grandfathering provision is particularly noteworthy, as it legally acknowledges existing significant shareholders while limiting their ability to increase their stake without board approval.

Market Research Analyst

The strategic move by ASA to adopt a shareholder rights plan in response to Saba Capital's share accumulation is a significant event in the market for gold and precious metals investments. This sector is known for its volatility and sensitivity to both market forces and geopolitical events. The Rights Plan could influence investor confidence and the perceived stability of ASA as an investment vehicle in this sector.

Market research would focus on the historical performance of companies that have adopted similar defensive measures and the subsequent investor response. The impact on ASA's competitive position within the gold mining industry is also of interest, particularly how the plan affects the company's ability to attract partnerships, joint ventures, or other strategic opportunities.

It is crucial to examine the broader market trends and investor sentiment towards gold and precious metals. The Rights Plan could either be seen as an assertion of strong governance, which might appeal to certain investors, or as a sign of vulnerability to takeover threats, potentially leading to a different investor reaction. The analysis of these market dynamics will provide insights into the long-term implications of the Rights Plan on ASA's market position.

Responds to Significant Share Accumulation by Saba Capital

Designed to Prevent Creeping Control and Protect Long-Term Value for All Shareholders

PORTLAND, Maine--(BUSINESS WIRE)-- The Board of Directors (the “Board”) of ASA Gold and Precious Metals Limited (“ASA” or the “Company”) (NYSE:ASA) has unanimously adopted a limited-duration shareholder rights plan (“Rights Plan”) to protect the interests of the Company and all of its shareholders. The Rights Plan is currently effective and will expire on April 29, 2024.

The limited-duration Rights Plan was adopted in response to the rapid and significant accumulation of ASA shares by Saba Capital Management, LP (“Saba”). In recent public filings, Saba disclosed that it and its affiliates have acquired a position in ASA representing 16.87% of ASA’s outstanding common shares.

The Rights Plan is intended to prevent Saba’s unilateral attempt to obtain creeping control of the Company, which the Board believes would undermine ASA’s strategic focus on long-term capital appreciation in the global gold mining industry. The Rights Plan is designed to enable ASA’s shareholders to realize the long-term value of their investment, provide an opportunity for all shareholders to receive fair and equal treatment in the event of any proposed takeover of ASA and guard against tactics to gain control of ASA without paying all shareholders, what the Board considers to be an appropriate premium for that control. The Rights Plan is not intended to deter offers or preclude the Board from taking action that it believes is in the best interest of the Company and its shareholders.

ASA will issue one right for each ASA common share outstanding as of the close of business on January 12, 2024. The rights will initially trade with ASA’s common shares and will become exercisable only if a person acquires 15% or more of ASA’s outstanding common shares. Any shareholders with beneficial ownership of 15% or more of ASA’s outstanding common shares (including Saba) prior to this announcement are grandfathered at their beneficial ownership levels at the date the Rights Plan was adopted, but are not permitted to acquire additional common shares representing 0.25% or more of the outstanding common shares without triggering the Rights Plan.

Pursuant to the Rights Plan, should it be triggered, the Board may decide that:

• Each holder of a right (other than the acquiring person, whose rights will have become void and will not be exercisable) will be entitled to purchase, for a purchase price of $1.00 per share, one ASA common share.

• Alternatively, (on a cashless basis) each outstanding right (other than the rights held by the acquiring person, whose rights will have become void) will be exchanged for one common share.

Further details about the Rights Plan will be contained in a Form 8-K and Form 8-A to be filed by ASA with the U.S. Securities and Exchange Commission.

Saba has previously advised ASA that it intends to nominate a control slate of directors for election to the Board at ASA’s 2024 annual meeting of shareholders.

About ASA

ASA is a non-diversified, closed-end fund that seeks long-term capital appreciation primarily through investing in companies engaged in the exploration for, development of projects in, or mining precious metals and minerals. On April 12, 2019, ASA shareholders voted to approve an investment advisory agreement between Merk and ASA.

It is a fundamental policy of ASA that at least 80% of its total assets must be (i) invested in common shares or securities convertible into common shares of companies engaged, directly or indirectly, in the exploration, mining or processing of gold, silver, platinum, diamonds or other precious minerals, (ii) held as bullion or other direct forms of gold, silver, platinum or other precious minerals, (iii) invested in instruments representing interests in gold, silver, platinum or other precious minerals such as certificates of deposit therefor, and/or (iv) invested in securities of investment companies, including exchange-traded funds, or other securities that seek to replicate the price movement of gold, silver or platinum bullion.

ASA employs bottom-up fundamental analysis and relies on detailed primary research, including meetings with company executives, site visits to key operating assets, and proprietary financial analysis in investment decisions. Investors are encouraged to visit the ASA’s website http://www.asaltd.com/ for additional information, including historical and current share prices, news releases, financial statements, tax, and supplemental information.

ASA is a “passive foreign investment company” for United States federal income tax purposes. As a result, United States shareholders holding shares in taxable accounts are encouraged to consult their tax advisors regarding the tax consequences of their investment in the Company’s common shares.

About Merk

Merk Investments LLC, an SEC-registered investment adviser, provides investment advice on liquid global markets, including domestic and international equities, fixed income, commodities, and currencies. For more information on Merk, please visit www.merkinvestments.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of U.S. federal securities laws that are intended to be covered by the safe harbors created thereunder. The Company’s actual performance or results may differ from its beliefs, expectations, estimates, goals and projections, and consequently, investors should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and generally can be identified by words such as “believe,” “anticipate,” “estimate,” “expect,” “intend,” “should,” “may,” “will,” “seek,” or similar expressions or their negative forms, or by references to strategy, plans, goals or intentions. The absence of these words or references does not mean that the statements are not forward-looking. The Company’s performance or results can fluctuate from month to month depending on a variety of factors, a number of which are beyond the Company’s control and/or are difficult to predict, including without limitation: the Company’s investment decisions, the performance of the securities in its investment portfolio, economic, political, market and financial factors, and the prices of gold, platinum and other precious minerals that may fluctuate substantially over short periods of time. The Company may or may not revise, correct or update the forward-looking statements as a result of new information, future events or otherwise.

The Company concentrates its investments in the gold and precious minerals sector. This sector may be more volatile than other industries and may be affected by movements in commodity prices triggered by international monetary and political developments. The Company is a non-diversified fund and, as such, may invest in fewer investments than that of a diversified portfolio. The Company may invest in smaller-sized companies that may be more volatile and less liquid than larger more established companies. Investments in foreign securities, especially those in the emerging markets, may involve increased risk as well as exposure to currency fluctuations. Shares of closed-end funds frequently trade at a discount to net asset value. All performance information reflects past performance and is presented on a total return basis. Past performance is no guarantee of future results. Current performance may differ from the performance shown.

This press release does not constitute an offer to sell or solicitation of an offer to buy any securities.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240102517341/en/

Axel Merk

Chief Operating Officer

(650) 376-3135 or (800) 432-3378

info@asaltd.com

Source: ASA Gold and Precious Metals Limited

FAQ

What is the purpose of the limited-duration shareholder rights plan adopted by ASA Gold and Precious Metals Limited (NYSE:ASA)?

The purpose of the limited-duration shareholder rights plan is to protect the interests of the Company and all of its shareholders against the rapid and significant accumulation of ASA shares by Saba Capital Management, LP.

When will the limited-duration shareholder rights plan expire?

The limited-duration shareholder rights plan will expire on April 29, 2024.

What percentage of ASA's outstanding common shares has Saba Capital Management, LP acquired?

Saba Capital Management, LP and its affiliates have acquired a position in ASA representing 16.87% of ASA’s outstanding common shares.

What are the implications of the Rights Plan being triggered?

If the Rights Plan is triggered, each holder of a right (other than the acquiring person) will be entitled to purchase one ASA common share for a purchase price of $1.00 per share, or each outstanding right will be exchanged for one common share on a cashless basis.