10-K: abrdn Palladium ETF Trust Reports Increased Shares Outstanding Despite Price Volatility in 2024

The abrdn Palladium ETF Trust saw its outstanding shares increase significantly in 2024, despite a nearly 20% drop in palladium prices, according to its latest 10-K filing.

Summary

• The abrdn Palladium ETF Trust's primary goal is to mirror the performance of physical palladium, accounting for trust expenses.
• The trust's shares outstanding increased from 2,100,000 on December 31, 2023, to 4,262,500 on December 31, 2024.
• The trust's net asset value (NAV) increased from $219.3 million to $354.1 million during the same period.
• Despite the increase in shares and NAV, the price of palladium decreased by 19.98% in 2024.
• The NAV per share decreased from $104.43 to $83.06.
• The Sponsor's Fee for 2024 was $1,737,833, equivalent to 0.60% of the trust's adjusted net asset value (ANAV).
• Effective June 18, 2024, the number of shares in a basket for creation and redemption purposes was reduced from 25,000 to 12,500.
• The trust's investment objective is to reflect the performance of physical palladium, less the trust's expenses.
• The trust does not engage in activities designed to profit from changes in palladium prices.
• The trust creates and redeems shares only in exchange for palladium, in aggregations of 12,500 shares, with registered broker-dealers.
• The Trustee values the Trust's palladium based on the LBMA Palladium Price PM or AM.
• The Sponsor has agreed to assume most of the expenses incurred by the Trust.
• The Trust relies on the information and technology systems of the Trustee, the Custodian, the Marketing Agent and the Sponsor, which could be adversely affected by information systems interruptions, cybersecurity attacks or other disruptions which could have a material adverse effect on the Trusts record keeping and operations.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the Trust saw growth in shares outstanding and NAV, the decline in palladium prices and NAV per share raises concerns. The sentiment is neutral, reflecting both positive and negative aspects.

Positives

• The Trust's NAV increased significantly, indicating strong investor interest.
• The number of outstanding shares nearly doubled, reflecting increased market participation.
• The Sponsor assumes most of the Trust's expenses, limiting the financial burden on shareholders.
• The Trust has procedures in place to manage cybersecurity threats.
• The Trust has a clearly defined investment objective and operational structure.

Negatives

• The price of palladium decreased significantly, negatively impacting the NAV per share.
• The Trust's performance is directly tied to the volatile price of palladium.
• The Trust is exposed to risks related to the custody of palladium, including potential loss, damage, or theft.
• The Trust's lack of insurance protection exposes it and its shareholders to potential losses.
• The Trust is not registered as an investment company, limiting regulatory protections for shareholders.

Risks

• Fluctuations in the price of palladium could materially adversely affect an investment in the Shares.
• Crises may motivate large-scale sales of palladium which could decrease the price of palladium and adversely affect an investment in the Shares.
• A decline in the automobile industry or a shift from gasoline-powered to electric vehicles may have the effect of causing a decline in the price of palladium and a corresponding decline in the price of Shares.
• The Trusts palladium may be subject to loss, damage, theft or restriction on access.
• The Trusts lack of insurance protection and the Shareholders limited rights of legal recourse against the Trust, the Trustee, the Sponsor, the Custodian and any sub-custodian exposes the Trust and its Shareholders to the risk of loss of the Trusts palladium for which no person is liable.
• War, a major terrorist attack and other geopolitical events, including but not limited to the war between Russia and Ukraine, outbreaks or public health emergencies (as declared by the World Health Organization), the continuation or expansion of war or other hostilities, or a prolonged government shutdown may cause volatility in the price of Bullion due to the importance of a country or region to the Bullion markets, market access restrictions imposed on some local Bullion producers and refiners, potential impacts to global transportation and shipping and other supply chain disruptions.
• Potential conflicts of interest may arise among the Sponsor or its affiliates and the Trust.

Future Outlook

The Trust undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Industry Context

The palladium market is influenced by factors such as global supply and demand, automotive industry trends, and geopolitical events, particularly in major producing countries like Russia and South Africa. The Trust's performance is directly linked to these market dynamics.

Comparison to Industry Standards

• Comparable ETFs include other precious metal ETFs, such as those focusing on gold, silver, and platinum.
• The Sponsor's Fee of 0.60% is a key factor in comparing the Trust to other similar investment vehicles.
• The Trust's reliance on the LBMA Palladium Price PM for valuation is a standard practice in the industry.
• The Trust's custody arrangements with ICBC Standard Bank Plc are similar to those of other precious metal ETFs.

Management Changes

Related Party Transactions

• The Sponsor's Fee is a related party transaction, paid by the Trust through in-kind transfers of palladium to the Sponsor.

Stakeholder Impact

• Shareholders are impacted by the fluctuations in palladium prices and the Trust's expenses.
• Authorized Participants are affected by the creation and redemption procedures and transaction fees.
• The Sponsor benefits from the Sponsor's Fee and assumes certain administrative and marketing expenses.
• The Trustee is responsible for the day-to-day administration of the Trust and receives fees paid by the Sponsor.

Key Dates