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Saba Capital Income & Opportunities Fund II (NYSE: SABA) announced a 1-for-2 reverse stock split, effective after trading closes on June 21, 2024. Post-split, trading will resume on June 24, 2024. The split adjusts every two issued shares into one, with a new CUSIP number: 880198205. The fixed monthly distribution also adjusts from $0.029 to $0.058 per share, ensuring no change in monthly cash flow to shareholders. Shareholders in the dividend reinvestment plan will receive fractional shares, while others will receive cash for fractional shares through Equiniti Trust Company. No action is required for shareholders holding shares in book-entry or via a broker. Those with physical certificates will need to exchange them for new ones to receive fractional share payments and future distributions. Risks involve equity market performance, reinsurance-related securities, high-yield bonds, and foreign investments. More details can be found in the Fund’s SEC filings.
Positive
- The reverse stock split can potentially lead to a higher share price, making the stock more attractive to institutional investors.
- The fixed monthly distribution adjustment ensures no change in monthly cash flow to shareholders, maintaining income stability.
- Shareholders participating in the dividend reinvestment plan will receive fractional shares, preserving their investment value.
- No action required for shareholders holding shares in book-entry or through brokers simplifies the process for many investors.
Negative
- The reverse stock split may lead to reduced liquidity due to fewer shares outstanding.
- Investors with physical share certificates must exchange them to receive fractional share payments and future distributions, adding inconvenience.
- The Fund’s investment in high-yield securities and reinsurance-related securities introduces significant risk factors.
- The Fund’s performance is subject to various economic and market risks, including fluctuations in interest rates and foreign investment risks.
The announcement of the 1-for-2 reverse stock split for Saba Capital Income & Opportunities Fund II (NYSE: SABA) is important for investors as it directly affects the number of shares they own and their share price. A reverse stock split reduces the number of outstanding shares, which typically results in an increase in the stock price. This might attract institutional investors who often have price-based investment criteria.
However, it’s important to note that while the reverse split might improve liquidity and attract more investors, the total market value of the Fund remains unchanged. This move is usually seen in two scenarios: companies looking to comply with stock exchange listing requirements or trying to make their stock more attractive to investors.
The fixed monthly distribution adjustment from $0.029 to $0.058 per share maintains the same cash flow, which is reassuring for income-focused investors. Nevertheless, the reverse split could also indicate management’s attempt to mask poor performance or forecasted instability, so investors should critically examine the Fund’s financial health and performance history.
The reverse stock split and managed distribution plan updates by Saba Fund II reflect strategic efforts to appeal to a broader investment base. The new share price post-split may appeal more to institutional investors, who typically avoid ‘penny stocks,’ potentially increasing the share’s appeal and marketability.
For retail investors, it’s important to understand that while the number of shares they hold will reduce by half, the value of each share will effectively double, maintaining the same investment value. This maneuver does not change the underlying economics of the Fund but could improve its perception.
The fractional shares management indicates a commitment to ensuring shareholders are adequately compensated, which is a positive sign of management’s attention to detail and shareholder interests. However, given the Fund’s diverse investment strategies, investors should remain cautious about the inherent risks in such a portfolio, including exposure to high-yield securities, reinsurance-related securities and foreign investments.
NEW YORK–(BUSINESS WIRE)– Saba Capital Income & Opportunities Fund II (NYSE: SABA) (the “Fund”), a registered closed-end management investment company listed on the New York Stock Exchange (the “NYSE”), today announced an update on the 1-for-2 reverse stock split (the “Reverse Split”) of the Fund’s common shares that was approved by its Board of Trustees (the “Board”).
The Reverse Split is expected to become effective immediately after the close of trading on the NYSE on June 21, 2024 (“Effective Date”), and the Fund’s common shares are expected to begin trading on the NYSE on a reverse split-adjusted basis at the open of trading on June 24, 2024. As of the Effective Date, every two shares of the Fund’s issued and outstanding common shares will be converted into one common share. The Fund’s common shares will continue to trade on the NYSE under the symbol “SABA,” and the new CUSIP number for the Fund’s common shares will be 880198205 following the Reverse Split.
The Fund has also adopted an updated managed distribution plan. In connection with the Reverse Split, the Fund’s fixed monthly distribution will be adjusted from $0.029 per share to $0.058 per share, beginning with the first distribution to be declared following the Effective Date of the Reverse Split. Such adjustment to the Fund’s fixed monthly distribution will result in no change in monthly cash flow to shareholders.
For shareholders who participate in the Fund’s dividend reinvestment plan (“DRIP”), the Fund intends to issue fractional shares in connection with the Reverse Split. For other shareholders who do not participate in the Fund’s DRIP, the Fund’s transfer agent, Equiniti Trust Company, LLC, will aggregate all such fractional shares and sell them as soon as practicable after the Reverse Split at then-prevailing prices on the open market. After the sale, such shareholders will receive a cash payment in an amount equal to their respective pro rata share of the total net proceeds of the sale.
Shareholders of record holding common shares in book-entry form or through a bank, broker or other nominee do not need to take any action in connection with the Reverse Split. Such shareholders will receive new share statements from Equiniti Trust Company, LLC regarding their post-Reverse Split common share ownership.
Shareholders of record holding common shares in certificate form will receive a transmittal letter from Equiniti Trust Company, LLC, accompanied by instructions specifying how to exchange their existing share certificates for new share certificates. Such shareholders who do not participate in the Fund’s DRIP, will not receive their (a) payment of cash in lieu of fractional shares or (b) future monthly distribution payments until such shareholders (y) exchange their existing share certificates for new share certificates and (z) deliver a completed transmittal letter to Equiniti Trust Company, LLC. For the avoidance of doubt, such payments will be held by Equiniti Trust Company, LLC for the benefit of such shareholders.
Past Performance is No Assurance of Future Results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. Investors should consider the investment objective, risks and expenses carefully. You can obtain the Fund’s most recent periodic reports and filings by visiting https://www.sec.gov/edgar/browse/?CIK=828803&owner=exclude.
Certain Risk Factors. The Fund’s investment objective is to provide investors with high current income, with a secondary goal of capital appreciation. There can be no assurance that the Fund will meet its investment objective. The Fund seeks to achieve this objective by investing globally in debt and equity securities of public and private companies, which includes, among other things, investments in closed‐end funds, reinsurance, and public and private debt instruments. The Fund also may utilize derivatives including but not limited to total return swaps, credit default swaps, options (including but not limited to index options) and futures, in seeking to enhance returns and/or to reduce portfolio risk. In addition, on an opportunistic basis, the Fund may also invest up to 15% of its total assets in private funds that focus on debt, equity or other investments consistent with the Fund’s investment objective.
The value of equity securities of public and private, listed and unlisted companies and equity derivatives generally varies with the performance of the issuer and movements in the equity markets more generally. As a result, the Fund may suffer losses if it invests in equity instruments of issuers whose performance diverges from the Fund’s investment adviser’s expectations or if equity markets generally move in a single direction and the Fund has not hedged against such a general move. The Fund may invest in closed-end funds, which are subject to additional risks and considerations. The performance of reinsurance-related securities and the reinsurance industry itself are tied to the occurrence of various triggering events, including but not limited to weather, natural disasters (hurricanes, earthquakes, etc.), non-natural large catastrophes and other specified events causing physical and/or economic loss. To the extent the Fund invests in reinsurance-related securities for which a triggering event occurs, losses associated with such event could result in losses to the Fund’s investment, and a series of major triggering events affecting a large portion of the reinsurance-related securities held by the Fund could result in substantial losses to the Fund’s investment. The Fund may invest in high yield securities, which are speculative in nature and are subject to additional risk factors such as increased possibility of default, illiquidity of the security, and changes in value based on changes in interest rates. Changes in short-term market interest rates may directly affect the yield on the Fund’s common shares. If such rates fall, the Fund’s yield may also fall. If interest rate spreads on bonds and loans owned by the Fund decline in general, the yield on the bonds and loans will likely fall and the value of such bonds and loans may decrease. When short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on bonds and loans in the Fund’s portfolio, the impact of rising rates will be delayed to the extent of such lag. Because of the limited secondary market for certain bonds and loans, the Fund’s ability to sell such securities in a timely fashion and/or at a favorable price may be limited. An increase in the demand for bonds and loans may adversely affect the rate of interest payable on new bonds and loans acquired by the Fund, and it may also increase the price of bonds and loans purchased by the Fund in the secondary market. A decrease in the demand for bonds and loans may adversely affect the price of bonds and loans in the Fund’s portfolio, which would cause the Fund’s NAV to decrease. Investment in foreign borrowers involves special risks, including but not limited to potentially less rigorous accounting requirements, differing legal systems and potential political, social and economic adversity. The Fund may engage in currency exchange transactions to seek to hedge, as closely as practicable, all of the economic impact to the Fund arising from foreign currency fluctuations. Other risks include, but are not limited to, the use of derivatives, the potential lack of diversification in the Fund’s portfolio, and the fact that the Fund’s portfolio may be concentrated in a small group of industries or industry sectors from time to time. Investors should consult the Fund’s filings with the Securities and Exchange Commission as well as the materials on the Fund’s website for a more detailed discussion of these or other risk factors that affect the Fund.
About Saba Capital Income & Opportunities Fund II. Saba Capital Income & Opportunities Fund II is a publicly-traded registered closed-end management investment company. The Fund’s common shares trade on the NYSE under the ticker symbol “SABA.” The Fund is managed by Saba Capital Management, L.P.
Forward-Looking Statements. This press release contains forward-looking statements subject to the inherent uncertainties in predicting future results and conditions. Any statements that are not statements of historical fact (including but not limited to statements containing the words “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions) should also be considered to be forward-looking statements. These statements are not guarantees of future performance, conditions or results and involve a number of risks and uncertainties. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements. These factors, including but not limited to the “Certain Risk Factors” noted above, are identified from time to time in the Fund’s filings with the Securities and Exchange Commission as well as the materials on the Fund’s website. The Fund undertakes no obligation to update such statements to reflect subsequent events, except as may be required by law.
For further information on Saba Capital Income & Opportunities Fund II, please visit our website at: www.sabacef.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240606265175/en/
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Source: Saba Capital Income & Opportunities Fund II
FAQ
What is the effective date for Saba Capital’s 1-for-2 reverse stock split?
The reverse stock split will be effective after the close of trading on June 21, 2024.
When will Saba Capital’s shares start trading on a reverse split-adjusted basis?
Shares will start trading on a reverse split-adjusted basis on June 24, 2024.
What is the new fixed monthly distribution for SABA after the reverse split?
The new fixed monthly distribution will be $0.058 per share.
What happens to fractional shares in Saba Capital’s reverse stock split?
Shareholders in the dividend reinvestment plan will receive fractional shares; others will receive cash for fractional shares.
Is action required for SABA shareholders holding shares in book-entry or through a broker?
No action is required for these shareholders.
What must shareholders with physical certificates do for Saba Capital’s reverse stock split?
They must exchange their existing share certificates for new ones to receive fractional share payments and future distributions.
