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Investment Trust Company - Discount to NAV

M

mulita

Member
Kindly assist in clarifying this 'share price being at a discount to NAV' pertaining to investment trust companies, and why it is positive point for ITC and not Unit Trust. Also how the narrowing or widening of this discount makes the ITC attractive?
 
Think of an Investment Trust Company as a company which is investing in assets such as say other companies' shares, properties etc. Now, the shares of this Investment trust company are listed on a stock exchange. You can buy the shares of the company at either a premium or a discount to the Net Asset Value. Assume the ITC owns a tourist complex which is worth 5 million dollars and the ITC has 5 million shares. Then, the NAV would be $1 per share but then the share can either trade at a discount or a premium according to the supply and demand for the share. This is the advantage of investing in an ITC , you can own an asset for less than what it is actually worth.

Hope this made sense !
 
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