A listed investment company or trust has two different numbers to follow: the value attributed to its net assets per share or unit, and the price at which investors trade it. Buyers and sellers do not have to agree with the latest asset valuation.

A price above net tangible assets, or NTA, is described as a premium. A price below NTA is a discount. Trading activity, sentiment and perceptions of the manager can influence the gap. ASX’s LIC and LIT guide discusses these differences.

For a hypothetical example, assume NTA is $3.00 per share and the matching-date market price is $2.40. The price is 20% below NTA:

($2.40 ÷ $3.00 − 1) × 100 = −20%.

Now hold NTA constant at $3.00 and increase the price to $2.70. The discount narrows to 10%, while the share price rises 12.5% from $2.40. This shows how an investor’s price experience can differ from the portfolio’s asset-value movement.

The reverse can happen too. If NTA falls to $2.70 and the discount stays at 20%, the implied price is $2.16. Both NTA and the price have fallen 10%. These examples exclude income payments, trading costs and personal tax.

A discount does not come with a promise that it will disappear. It can persist or widen, and the assets themselves can lose value. The same basic pricing risk is described in Investor.gov’s guide to US closed-end funds; its US legal and tax details do not describe Australian funds.

Before interpreting a published gap, identify the two dates and the NTA tax basis. An old asset figure compared with today’s price gives a different observation from two values measured together. The percentage is a starting point for understanding the relationship, not a stand-alone verdict on value.

Educational information only. It does not take account of your objectives, financial situation or needs.