Gabelli Multimedia Trust: This 5.125% Preferred Stock Started Trading On The NYSE – Gabelli Global Multimedia Trust (NYSE:GGT)

Introduction

This article offers a brief analysis of Gabelli Multimedia Trust’s (NYSE: GGT) newly issued preferred stock.

Our goal is purely to inform you about the product while refraining ourselves from an investment recommendation. Even though the product may not be of interest to us and our financial objectives, it definitely is worth taking a look at.

The New Issue

Before we proceed, those who wish to review the prospectus itself may follow this link to the official 497 Filing by Gabelli Multimedia Trust.
Source: SEC.gov

For a total of 2M shares issued, the total gross proceeds to the company are $50M. You can find some relevant information about the new preferred stock in the table below:

Source: Author’s spreadsheet

Gabelli Multimedia Trust 5.125% Series E Cumulative Preferred Shares (NYSE: GGT-E) pays a qualified fixed dividend at a rate of 5.125%. The new issue has no S&P rating and is callable as of 09/26/2022. However, the company anticipates an A2 rating to be assigned from Moody’s Investor Service. Currently, the new issue trades on Grey market under the symbol GLLFP at a price of $25.02. This translates into a Current Yield of 5.13% and YTC of 5.12%

Source: Author’s spreadsheet

The Company

From Fund Factsheet | Gabelli.com

The Gabelli Multimedia Trust (NYSE: GGT) is a non-diversified, closed-end management investment company whose primary objective is long term growth of capital, with income as a secondary objective. The Fund seeks opportunities for long term growth within the context of two main investment universes: companies involved in creativity, as it relates to the development of intellectual property rights (copyrights); and companies involved in distribution as it relates to the delivery of these copyrights. Additionally, the Fund will invest in companies participating in emerging technological advances in interactive services and products.

Source: Gabelli.com | The Gabelli Multimedia Trust Inc.

While the text above provides us with a stepping stone in terms of information about the fund, it means nothing without looking at some numbers:

Source: Cefdata.com

The Fund’s investment advisor is Gabelli Funds, LLC. Other Closed-End Funds from the same investment advisory are: GAB, GCV, GUT, GDV, GLU, GGN, GDL, GRX, GNT, GGZ, BCV, ECF and GGO.

The “Gabelli Family”

Tha chart below shows some relevant information about all 21 preferred stocks, issued by “The Gabelli Funds”.

Source: Author’s spreadsheet

To give a better idea of where the new preferred stock stands in comparison with its relative peer group, you can see the chart below. It presents the preferred stocks from the group by their % of Par and Current Yield.

Source: Author’s spreadsheet

An observation could be made that almost all of these securities trade at a Current yield between 5.00% and 5.75%.

Sector Comparison

Source: Author’s spreadsheet

The chart above contains all preferred stocks and units in the Closed-End Fund – Equity sector (according to FINVIZ.COM) by their market price as a % of Par Value and their Current yield.

Special Considerations

As more fully described below, upon receipt of a subscription right, a preferred stockholder generally will be treated as receiving a taxable distribution in an amount equal to the fair market value of the subscription right the preferred stockholder receives.

To the extent that the distribution is made out of the Fund’s earnings and profits, the subscription right will be a taxable dividend to the preferred stockholder. If the amount of the distribution received by the preferred stockholder exceeds such stockholder’s proportionate share of the Fund’s earnings and profits, the excess will reduce the preferred stockholder’s tax basis in the shares of preferred stock with respect to which the subscription right was issued (the old share). To the extent that the excess is greater than the preferred stockholder’s tax basis in the old shares, such excess will be treated as gain from the sale of the old shares. If the preferred stockholder held the old shares for more than one year, such gain will be treated as long-term capital gain.

Source: SEC.gov – 497 Filing by Gabelli Multimedia Trust

Asset Coverage Ratio

Pursuant to the 1940 Act, the Fund generally will not be permitted to declare any dividend, or declare any other distribution, upon any outstanding common shares, purchase any common shares, or issue preferred shares, unless, in every such case, all preferred shares issued by the Fund have at the time of declaration of any such dividend or distribution or at the time of any such purchase or issuance an asset coverage of at least 200% (“1940 Act Asset Coverage Requirement”) after deducting the amount of such dividend, distribution, or purchase price, as the case may be. As of the date of this Prospectus Supplement, all of the Fund’s outstanding preferred shares are expected to have asset coverage on the date of issuance of the Series E Preferred Shares of approximately 447%.

Source: SEC.gov – 497 Filing by Gabelli Multimedia Trust

Addition to the S&P preferred stock index

With the current market capitalization of GGT-E of only $50M, it cannot be an addition to the S&P preferred stock index (NASDAQ: PFF).

Conclusion

While our goal is to merely keep the investment crowd informed, in case anyone has missed this preferred stock, and GGT-E is unlikely to find a spot in our own portfolio, we do not dismiss it by any means.

This is a purely informational article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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