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Wise words
I’ve dug as much as I can about some of the underlying companies and am pretty comfortable.
Woodward obviously bringing all down a bit so room for arbitrage if grow valuations solid. I can’t see incentive for exaggerated valuations as they have consistently exceeded target. Better to then err on the conservative side and have a bit of a buffer I think.
I’ll go to agm and ask some awkward questions but for now heavy invested in grow as a better growth share than builders right now.
Wish me luck.
>The more I look at it the more I am convinced the NAV is conservatively calculated and there is hidden treasure as we had for TEF
Steph, did you take a look at the Woodford Patient Fund? Surely the same arguments apply to them too? You'd think they would have had the pick of the best tech companies around yet they didn't have a great record (but perhaps you have to be more patient?). Why are you so convinced it is different with GROW?
With these funds apparently keen to invest in small technology companies (and taking a cut of the investment money themselves) you have to wonder whether the values are realistic. Or are they just paying more each time the company asks, creating the impression of growth in value?
I think you'd have to look at each company that the fund invests in and ask yourself whether what has been paid is realistic or is there just so much cash around with those hoping to find the next Google or Facebook that people are paying silly prices? But are you actually provided with this info.?
Are there any of these funds that have been going for long enough to look at how many of their investments work out? Technology has always been around so you'd expect so. I can remember a couple these type of funds folding after the tech bubble burst. Do you know if any have been going since before the financial crisis?
I held shares in PurpleBricks for a while which is slightly different but the original owners raised capital in several stages. There were some investors pre-IPO but they eventually got listed on AIM at £1 per share from memory. Later on they raised capital by issuing new shares at £2.20 a share and investment funds were falling over themselves to get some. A few weeks later the owners sold some of their own shares at £3 because investment funds weren't satisfied. Then a while later they raised more capital at £3.60 and the original owners also sold some then too. In terms of the business, things didn't quite pan out the way investors hoped and the shares are now trading at about £1 (after being around £5 at one time) and the original owners have now sold all their shares.
Sain will tell you about another online Estate Agent which was about to have an IPO. Before doing so they had one final round of crowdfunding and I think the reason they gave (or one of them anyway) was to reward the investors who had supported them up until that point. A few months later they called in the receivers.
https://www.lse.co.uk/rns/GROW/interim-results-ph76bsl5w78ufx9.html
I'm getting more comfortable with this as a UK builders alternative. 20% discount to NAV/share is really good for the tech sector. PCN and SMT are over NAV. A 40% +discount to broker consensus even better. Brokers consistently saying this should trade at a premium to NAV/share which is unusual but given the fast growing nature of the assets owned maybe quite sustainable.
The more I look at it the more I am convinced the NAV is conservatively calculated and there is hidden treasure as we had for TEF. Valuation of NAV of underlying assets is mostly what shares the last funding round got which is a very conservative way to do it. Due diligence takes months and often the start up has no oven ready alternative to the funder and wants to grow fast to take advantage of huge opportunities and may have already partly spent the incoming funds (best friend has been there). So the final strike price is usually a reflection of conditions of a few months back and a substantial rip off compared to what the company could have gotten in the commercial market if they were publically traded -or if they had more time to chase multiple funds. They generally don't, they are focused on their core business not fund raising, so an arbitrage opportunity.