BEO Tender Offer- Insane Behavior?

The  Enhanced S&P 500 Covered Call Fund (ticker: BEO) recently announce the completion of a tender offer on October 14. The Fund offered to re-purchase up to 5% of its shares at a price equal to NAV (subject to a repurchase fee of up to 2% of the NAV) as of the close of regular trading on October 28, 2009.

Since BEO is currently trading at a 19% premium above NAV, you would not expect any rational person to tender their BEO shares unless they thought the NAV would appreciate at least 20% in the next two weeks.

But the Fund’s agent indicated that 15,302 shares (approx. 0.17% of the Fund’s outstanding shares) were validly tendered. In May of 2009, BEO was selling at a discount to NAV. It is possible that some investors or their financial advisors made a decision to tender their shares in May and neglected to cancel the tender  later. I would appreciate hearing from any blog readers that can explain a rationale behind the tender decision.

Another odd thing about BEO is that the fund is terminating in October 2010, so the 19% premium also seems irrationally high.

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4 responses to “BEO Tender Offer- Insane Behavior?

  1. All the IQIA funds are at ridiculous premiums. BEO & BEP are just the poster children for what investors will pay for yield w/out knowing what they are getting into.

    Wonder if you’re identifying any CEF’s which might have a dividend RAISE this quarter. I think NFJ is a given but I also think JSN, JLA & JPZ have a good chance as well.

    • I also like NFJ now.

      JSN, JLA and JPZ are all good funds, but their discounts have narrowed quite a bit. I would wait for discounts > 10% before buying them.

  2. What proof do you have that BEO is terminating in October 2010?

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