How To Play The BlackRock Tender Offers: Start With Buying BOE

seekingalpha08-29

The first period of Tender Offers for the BlackRock equity CEFs is now complete.Here's what we've learned and here is the best opportunity among the funds if you want to take advantage of the next ...

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GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4717890-how-to-play-the-blackrock-tender-offers-start-with-buying-boe><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The first period of Tender Offers for the BlackRock equity CEFs is now complete.Here's what we've learned and here is the best opportunity among the funds if you want to take advantage of the next ...</p>\n\n<a href=\"https://seekingalpha.com/article/4717890-how-to-play-the-blackrock-tender-offers-start-with-buying-boe\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU2505996681.GBP","symbol_name":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (GBPHDG) 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equity CEFs is now complete.Here's what we've learned and here is the best opportunity among the funds if you want to take advantage of the next three three-month measurement periods.The Tender Offers were the result of activist investors who put pressure on BlackRock to take steps to help reduce the discounts of their funds.Essentially, if the average discount for a fund over each three-month period is greater than -7.5%, BlackRock will buy back 2.5% of the fund's outstanding shares and convert to tender offer shares.Shareholders who put in for the offering would then receive 98% of the fund's higher NAV. But there's an added twist to this that can make the 2.5% of your tendered shares a significantly higher-percent.   hapabapa For those who participated in the Tender Offer program from BlackRock, they may have been surprised by how many shares were actually tendered. That's because the Pro-Ration Factor (see below) was dependent on how many shareholders of each fund put in their shares to be tendered. So using the first grouping of funds listed below, if a smaller number of shareholders put in for the offer, the result would be a higher percent in the Pro-Ration Factor based on the number of tendered shares purchased.   BlackRockAnd using the BlackRock Enhanced Capital & Income Fund (CII), $19.53 closing market price, as an example, that turned out to be a fairly high +18.9% Pro-Ration Factor. CII was my largest BlackRock equity CEF holding, and for clients who owned as many as 1,550 shares of CII, they saw 292 shares tendered at $20.9524, which was 98% of the NAV of CII the day after the offering expired. That was good for an immediate +7.8% gain on 292 shares, which could be bought back at any time. Here are the other funds from BlackRock that saw tendered shares:   BlackRock   BlackRock   BlackRock And since this was only the first of four Measurement Periods that BlackRock is conducting for this Discount Management Program going out to March 30, 2025, I thought it would be a good exercise to see which of the BlackRock funds offered the best opportunity to cash in on the discount. Because you don't get the opportunity to \"monetize\" the discount very often from fund sponsors and when you get the chance, you need to take advantage of it. Using the table below, one of the best opportunities right now would be to buy the BlackRock Enhanced Global Dividend fund (NYSE:BOE), $11.03 closing market price. That's because, based on the most recent period, not only did shareholders see an +11.3% bump in the tender offer price over BOE's current market price of $11.03, you could have also cashed in over 100 shares tendered for every 1000 shares of BOE you owned.   Capital Income Management, LLC That's a very attractive combination right now because if you could replicate that over the next three measurement periods, you could tender roughly 30% of your total shares of BOE at double-digit gains. And since the second measurement period is underway right now and will close on Sept. 30, that's only a month away to lock in your favorite BlackRock funds. Yes, a fund like the BlackRock Health Sciences fund (BME), $41.97 current market price, which saw the highest Tender Offer Pro-Ration at 0.2722672, and could result in virtually all of your shares being tendered over the next three periods if that ratio stayed the same. But at only a 6.0% gain, would that be worth it? There's a good chance that BME, which has had a great track record as a healthcare focused CEF, might perform even better over that period of time. And here's the next consideration to think about in choosing which BlackRock funds offer the best Tender Offer fundamentals. How will each fund's NAV perform over the next seven months since the Tender Offer market price will be based on 98% of the fund's NAV at the expiration of each three-month period. Clearly, you won't be able to maximize a Tender Offer if a fund's NAV is declining. And for some of the BlackRock funds, like (BCAT) and (ECAT), which have ridiculously high NAV and MKT yields, you can probably expect significantly lower NAVs over the next seven months out to March 2025. Speaking of BCAT and ECAT, these funds wouldn't even qualify for the next round of Tender Offers because both funds have discounts that are now higher than the -7.5% threshold. That may all be a function of the ultra-high yields that BCAT and ECAT offer, but remember, those high yields are worthless until the fund can make up each distribution. In fact, I would be swapping out of BCAT and ECAT and moving the proceeds to BOE. The BlackRock Enhanced Global Dividend Trust (BOE) Why do I believe BOE has the best fundamentals to take advantage of the next three tender offer periods? The biggest reason, besides the very attractive discount and the number of shares tendered in the first period, is that BOE is a well-diversified fund that won't get you in too much trouble if the markets don't do well out to March 30, 2025, which is the end date for the last three-month period. BOE is not over-loaded in the technology sector like the BlackRock fund's (BST), (BSTZ) or (BIGZ) are, and in fact, has roughly equal sector weightings in the industrial, healthcare, financials and consumer staple sectors. In other words, BOE is more focused on dividend yielding large-cap global stocks, which is why dividend is in BOE's name. Here are BOE's Top 10 holdings and geographic breakdown:   BlackRockAnother positive for BOE is that the fund writes individual stock options on roughly 43% of the value of each position. That generates plenty of income for the fund, which is easily covering its 6% NAV yield. But because of the -12.3% discount, a current buyer of BOE would receive a 6.9% current market yield. YTD, BOE's NAV is up +10.8%, which is pretty good for a global value stock focused option-income fund. But frankly, I'm more interested in just seeing the fund have steady NAV performance over the next three measurement periods.  I don't need BOE to take undue risk at NAV or overpay its distribution like some of other BlackRock funds are doing. And since the fund has already seen its NAV move up from $11.81 at the beginning of the year to $12.58 today, that just plays right into the Tender Offer strategy to maximize each period gains. Conclusion Frankly, I don't think you can go wrong with any of the BlackRock funds that trade at double-digit discounts right now. The BlackRock Energy & Resources fund (BGR), $13.05 closing market price, and the BlackRock Resources & Commodities Strategy fund (BCX), $9.24 closing market price, also stand out with high net gains after the first period, but both funds are sector focused and haven't had near the NAV performance as BOE. But no matter which BlackRock funds you choose, you should take advantage of what BlackRock is offering over the next seven months. Because rarely do you get the opportunity to cash out your CEFs at close to NAV. And if the end result is discounts narrowing for the BlackRock funds, which is the purpose of the program in the first place, then you may see less and less shareholders feeling the need to put in for the Tender Offers.  And if that happens, then a fund like BOE might actually see its proration go up for those that do. And that's how you play the BlackRock Tender Offerings.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2463925101"}