Gabelli Merchant Partners half-year: steady NAV, stubborn discount
Gabelli Merchant Partners Plc (GMP) has posted a quietly positive half-year to 31 December 2025. Net asset value (NAV) crept up to $10.69 per share, a 2.79% total return, while the share price slipped to $8.50, leaving a wide 20.49% discount to NAV. For context, the U.S. 3‑month Treasury Bill Index returned 3.65% over the same period, so underlying returns lagged cash-like benchmarks even as NAV edged higher.
NAV is the per-share value of the portfolio after fees and costs. The “discount” is how far the market price sits below NAV; a 20.49% discount means investors can buy $1 of assets for roughly 80 cents. That is attractive if the gap narrows – but frustrating if it persists.
Key numbers investors should know
| NAV per share (31 Dec 2025) | $10.69 |
| Share price (31 Dec 2025) | $8.50 |
| Discount to NAV | 20.49% |
| Half-year NAV total return | 2.79% |
| Half-year share price total return | (5.01)% |
| Annualised ongoing charges | 1.89% |
| Net assets | $74.06 million |
| Investments at fair value | $69.89 million |
| Cash and cash equivalents | $8.56 million |
| Interim dividend declared (payable 27 March 2026) | $0.10 per share |
Portfolio positioning: half in equities, half in T‑bills
The portfolio mix is almost 50/50 between equities (50.9%) and fixed income (48.9%), with a sliver in derivatives (0.2%). The top twenty positions account for 72.6% of assets, and the single biggest line items are short-dated U.S. Treasury Bills across multiple maturities – a deliberate, defensive tilt that earns decent yield, preserves optionality, and keeps liquidity high.
Among equities, notable names include Frontier Communications Parent Inc, Dayforce Inc, Chart Industries Inc, Electronic Arts Inc, Exact Sciences Corp, Cyberark Software Ltd, and Hologic Inc. This sits alongside a spread of merger-arbitrage and special-situations exposure expressed through shares and a modest book of contracts for difference (CFDs) with a total unrealised gain of $107,000.
What drove the half-year result
GMP’s strategy is “PMV with a Catalyst” – buying at a discount to private market value and seeking events (like mergers) that unlock it. 2025 was a busy M&A year globally ($4.6 trillion of deal value), which is fertile ground for merger arbitrage. Even so, the trust’s 2.79% NAV total return trailed T‑bills, suggesting the equity and event-driven book did not add as much as cash yields during the period.
On the income front, investment income rose to $1.12 million, driven primarily by returns on short-term investments (largely U.S. Treasury Bills) of $828,000. Net realised and unrealised gains on investments contributed $2.25 million. Total revenues came in at $5.81 million against expenses of $3.24 million, delivering profit for the period of $2.03 million, or $0.29 per share.
Dividend continuity and shareholder cash
GMP paid a $0.10 per share interim dividend on 14 November 2025 and has declared a further $0.10 for payment on 27 March 2026 (record date 13 March). Since listing, the company has distributed $3.15 per share in dividends, totalling $29.4 million. The Board says future payments will be based on profits and are under continuous review.
Why the discount is so wide – and sticky
Two structural factors matter here:
- Trading venue and liquidity: the shares sit on the Specialist Fund Segment and trade via SETSqx auctions (8:00, 9:00, 11:00, 14:00 and 16:35 UK time). There is no market maker. If buyers and sellers don’t meet at auction, nothing trades. This can entrench discounts.
- Ownership concentration: Associated Capital Group, Inc. holds 92.7% of the shares and may be able to ensure approval of shareholder resolutions. Free float is therefore thin, again limiting liquidity.
The Board notes it “may initiate a buyback programme when the Company’s share price represents a material discount.” No buyback was announced in this RNS. In my view, any credible discount-control policy – buybacks or a tender – would be a clear catalyst for re-rating.
Tax, charges and leverage – the housekeeping bits
- Investment trust status: the group no longer meets the requirements of Section 1158 to be an investment trust but continues as an investment company.
- Deferred tax asset (DTA): a $1.26 million DTA ($0.18 per share) is recognised and expected to be utilised, resulting in no cash UK tax due for this year. A DTA is an accounting asset that reduces future tax bills when profits arise.
- Costs: annualised ongoing charges improved to 1.89% (from 2.09%).
- Leverage: actual leverage stood at 105% (gross method) and 120% (commitment method), well within limits.
- Balance sheet: cash and cash equivalents were $8.56 million; there was a bank overdraft of $4.72 million, leaving ample liquidity.
Manager highlights from a busy M&A tape
The review flags completed deals that supported returns, including Paramount Global’s tie-up with Skydance, Kellanova’s takeout, Covestro’s sale and Hess’s merger with Chevron. The manager argues that cooling inflation, a normalised rate backdrop and a more predictable antitrust stance are supportive for 2026 merger spreads. That should, in theory, play to GMP’s strengths.
Opportunities, risks, and what I’m watching next
- Potential positives
- High liquidity via T‑bills offers flexibility to pounce on spreads as deals progress.
- Dividend continuity – another $0.10 declared – underpins total return.
- Charges nudging down and no cash tax expected thanks to the DTA.
- Key risks
- Persistent 20%+ discount due to venue, liquidity and concentrated ownership.
- Half-year NAV return below T‑bills despite heavy T‑bill exposure – the active book needs to pull more weight.
- Loss of investment trust status adds complexity, though the DTA helps near term.
Josh’s take: value on the table, but mind the structure
On fundamentals, GMP delivered steady progress: NAV up, income healthy, liquidity strong, and a dividend in the post. On structure, the picture is tougher: 92.7% ownership by a single holder and auction-only trading are powerful headwinds to closing a 20.49% discount.
If you buy the merger-arbitrage pipeline and like the defensive ballast of short-dated Treasuries, the entry price is appealing. For that value to crystallise, look for concrete discount-control actions (not disclosed), continued deployment of T‑bill cash into accretive deals, and evidence that the GSIL UK acquisition keeps growing advisory and distribution revenues ($2.44 million this half). Until then, expect the discount to do what discounts do on illiquid segments – stick around longer than you’d like.
Bottom line: a cautiously positive half-year operationally, with a glaring valuation gap. The assets are doing their job; it’s the market mechanics that need a nudge.
