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Thanks for your analysis.
For my money I think this trust will sharply correct to an SP to roughly it’s 2021 peak and then go up steadily but not spectacularly from there. Organic sales growth of portfolio, organic advancement to net profitability of some and a maturing of the seed component mean it will grow into the mid 2021 valuations and more even if the valuation multiples remain 50% or more below 2021 levels.
AI is interesting. Been many false starts for 3 decades on IT resulting in real cost savings for office jobs that never really happened. Existing jobs just done with some limited IT support. We now type our memos in our own computers and not through a typing pool. We send a lot more mail than we used to do rather than the same amount more efficiently. We continue to have live meetings. We can research faster but have used that to research more rather than the same amount more efficiently. Impact on productivity has been as a result marginal.
Maybe this time IT (powered by AI) will really have a big impact on office work productivity per worker. If so trillions to be made by the industry leaders. global gdp 85 trillion us dollars and a significant percentage of that is the type of jobs that might respond to AI displacement. Too bad Graphcore did not scale up fast enough to get on that train. I still expect it will get a few crumbs for it’s IP and team (equal to a decent profitable exit for GROW) which have held together remarkably well.
From time to time valuations are haywire and, as the values are in businesses that are not publically quoted, can only really be guessed at until the figures are publically disclosed. We know that during the period of 2020 that small businesses were hit particularly hard and that 2021 had the green shoots for recovery. I had hoped (in common with many) that recovery would last and that the recessionary effect of world wide lockdowns would be over. Sadly Mr Putin decided to invade Ukraine in 2022 and that was sufficient to tip the balance to have rapidly rising prices, inflation, a faltering economy and a cost of living crisis. This caused markets to reduce valuations around the world (my portfolio was down over 20% or nearly 7 figures) but a brief recovery started in April 2023 to fizzle out in July.
Large caps started the long hoped for recovery in October 2023 and have continued momentum. This has not yet really filtered to the small companies and certainly not to the tiddlers that are unquoted. My hunch is that we have a few more months at depressed prices, either to sweat things out, abandon this or accumulate in anticipation of things to come.
For myself, I like to average up and see no compelling reason to add more with the uncertainty that I perceive to be evidenced. This is a trust where I am content to trust the managers to do a good job, I can certainly afford to write my capital off, but not to compound my losses when I can bung more money into those that are doing well.
We are still below our IPO price of 3.00 on June 16 2016.
8 years on, no dividends and less than our IPO. Gigantic destruction of value.
It’s not as if we made any big mistakes. Portfolio much bigger and more valuable than in 2016. Few bankruptcies within our core portfolio. Companies in core portfolio growing sales at a rapid pace. Some such as Revolut have broken even and thus have infinite runways.
This SP nightmare will surely end soon.
Chrysalis, the London-listed investment fund that has a stake in Graphcore, said in December that an unnamed company in its portfolio was in the process of being sold. Weeks later it more than doubled the valuation of its Graphcore stake, which analysts at Zeus Capital said was possibly related to a sale of the company. One investor has calculated that this put a $528m valuation on Graphcore.
The investment manager Baillie Gifford also more than doubled the valuation of its stake in Graphcore in recent weeks.
Both investors had previously significantly written down their investments in Graphcore as the company struggled to gain a foothold in the market for AI chips despite huge spending on artificial intelligence. It has also been hit by the closure of its business in China amid US controls on selling AI technology.
I just wish markets stay high long enough for us to recover our mojo. Seed never declined in valuations and post IPO profitable tech never been more in favor. Inbetween we are still screwed yet our portfolio has consistently been growing sales since the SP decline set in 2.5 years ago and by big 50% pa. Also not a single core portfolio company has gone bust. Even Graphcore, written of by some, probably has the NAV or more we have on our books.
Lets have a more realistic SP aligned with our quite conservative NAV/share. From there lets have some NAV/share upgrades as the market for unlisted tech improves.
I expect within 3 years if not sooner we will exceed our high last reached 2.5 years ago. From there steady 15% pa or more growth so long as the general market does not crash (big if).
This has been a much mor volitive investment than I ever thought it would be but long cycle lots of repressed value. 10 years form now we will be a very different SP and I will as a result be a rich pensioner by then.
https://www.economist.com/finance-and-economics/2024/02/25/stockmarkets-are-booming-but-the-good-times-are-unlikely-to-last
Sent from Yahoo Mail for iPad
The Group has acquired approximately 19% of the Fund for €8.5m. This 2016 vintage fund contains a portfolio of high-growth, disruptive technology companies, with over 80% of the value concentrated in six mature, proven assets in attractive market segments: Revolut, Pleo, Grover, WeFox, Thriva and Curve.
What a boost for investor confidence in the rest of our core portfolio. Graphcore was the most vulnerable to a write down.
HOpe any announcement is before march 31 so it can be included in NAV calculations for year end. NO detail on what 500m us dollars bid means. Is that for 100% of graphcore or just a large and/or controlling stake. With 3 parties potentially interested maybe final will be greater than the rumor.
With what seems to be a writedown to nil, a buyer for Graphcore could completely transform the perception of Molten Ventures to the investing public.
Also heartened with the snippet released today, not directly featuring GROW but looking behind where the money actually is. 1:8 is 12.5% and surely a trickle is destined for shares in GROW? https://citywire.com/investment-trust-insider/news/aic-reveals-trusts-take-1-in-8-from-hargreaves-and-interactive/a2436511
Https://twitter.com/MoltenVentures/status/1759920909194785081
Https://businesscloud.co.uk/news/will-graphcore-be-sold-to-cover-heavy-losses/
“Investment manager Baillie Gifford has more than doubled the valuation of its stake in Graphcore in recent months, as has London-listed investment fund Chrysalis, leading to speculation of a sale.“
Https://www.pitchbook.com/news/articles/ipo-watchlist-europe-unicorns-vc-exits
Well at least AI itself in favour of graphcore
come on graphcore do a successful funding round
Yeah it's getting ridiculous now. Comparable small cap US tech stocks like Confluent, UI Path and the likes of Workday have also surged recently.
The moribund UK market is keeping this pinned down.
One of the former core companies Lyst I expected to go under but they seem to be doing better reporting £50m revenue for 2023.
Not a game changer but signs of solidity within the portfolio.
And I think core companies Iceye, Aiven, Coachhub, Thought Machine are close to breaking out.
Iceye are doing promo vids for selling multiple satellites for government contracts and they are about £10m a pop. On top of their most recent £100m revenue. And they are still not officially a unicorn.
There also must be some quality in the Forward portfolio. One of theirs, Robin AI raised last month with Temasek leading. I suppose Molten had to sit it out and got diluted but still a positive sign.
Https://files.pitchbook.com/website/files/pdf/2023_Annual_US_VC_Valuations_Report.pdf
OUr pipeline is odd and oversold Seed and pre seed unaffected by market dip. Mature listed tech at historic highs in spite of 2 hot wars. All the steps in between at low valuations but not low enough to justify our discount to an already significantly discounted NAV. Plus our preference share structure.
Sooner or later we will surge , just can't say when. Hold or add. I’ll add a few in my isa April 6th
Added some more MV shares....
using profits from recently sold US stock.
Somehow felt a good time/place to add.
Https://www.theguardian.com/business/2024/feb/09/sp-500-stock-index-5000?CMP=Share_iOSApp_Other
This would directly help molten ventures obtain a price closer to fair value
https://www.theguardian.com/politics/2024/feb/09/jeremy-hunt-may-launch-british-isa-investing-in-uk-company-shares?CMP=Share_AndroidApp_Other
True but if you have valuable ip in the worlds hottest new economic sector needed funding will find a way. might not be a classic funding round. maybe merger of some description.
ive not heard of recent staff reductions/defections so staff think worth hanging about in spite of extreme personal marketability right now.
You could have the most valuable IP in the world but if you have no funds to exploit it....
Good point, I guess it depends on how much the pre-funding valuation is (i.e. the current IP value) but if low then agree that MV likely to be wiped out!
Steph I have said this before.
Graphcore say they need 1bn to keep going until 2027 as that is when they hope to generate significant revenue.
Molten are unlikely to commit more as to play it would mean stumping up a lot of cash.
So if a raise at that scale took place it would wipe out Molten's position through massive dilution.
That is why Sequoia wrote it down to zero on their books.
I assume he has the funding needed sewn up if he has time for a tour