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IMHO..there are at least three aspects to this..
Firstly start ups/early life companies which chrys investment in require cash during the early years to get going. When interest rates are low this is 'easy' but when interest rates are high this increases costs , changes the risk profile and reduces the amount of future profit in the equation.
Secondly when people can earn 5% risk free from a bank then they are less likely to invest in higher risk investments which means there are fewer buyers. In chrys case this has been amplified by Jupiters decision to sell out (from a holding of over 25%)
Thirdly the IPO market has effectively been closed for almost 2 years so realisations from the chrys portfolio have been thin on the ground. A knock.on effect of this is that the valuations of the portfolio have not had a lot of support from the market in terms of confirmation that the are correct/under value.
The good news is that all of the above is changing and the headwinds are about to turn into tailwinds.
"...making the Chrysalis shares trade at a 52% discount. We see no reason why the carrying value of other major assets is too high, particularly as the interest rate tightening cycle in the UK, US and Eurozone comes to an end and discount rates start to fall..."
Would some knowledgeable person mind explaining to me the correlation between US/UK interest rates (expected) to come down and the effect upon the NAV discount likely to narrow, as I don't understand?
Thanks
Interesting note from the analyst. I'd add that the forthcoming disposal cash if/when used for buybacks will boost the share price even further and reduce the discount particlarly as the Jupiter selling pressure ends.
Zeus Capital initiated coverage. Make an note of some of the things they say:
" We estimate Chrysalis’ stake in Starling could be worth 33% more, equivalent to an additional 9.6p of NAV per share. Further, we think Chrysalis’ stake in Klarna could be worth c. 80% more (£169m), equivalent to an additional 12.4p of NAV per share. This uplift in Starling and Klarna would increase NAV per share by 15% to 165p, making the Chrysalis shares trade at a 52% discount. We see no reason why the carrying value of other major assets is too high, particularly as the interest rate tightening cycle in the UK, US and Eurozone comes to an end and discount rates start to fall."
" Furthermore, on 5 December Chrysalis announced it had visibility over a disposal that would add 5.5p per share to the Group’s NAV at 30 September 2023, which we estimate could result in an inflow of £56m if it relates to one of its three medium sized investments (see page 16), taking cash to c. £75m"
It's inevitable that it's going to be much better than the last one and will probably move the price up even further...if there is any more rumours on a Starling float then this will rocket....
Hoping for a decent one...
Nice but it doesn’t even take us back to 1st Jan so more to come
Https://www.bnnbloomberg.ca/klarna-ceo-on-the-evolution-of-digital-payment-tech-1.2025080
If it does this on the Klarna IPO then it will probably hit 100p when Starling Bank floats
Good update - Thanks
Klarna IPO on the cards https://www.bnnbloomberg.ca/fintech-klarna-ceo-signals-ipo-in-us-may-happen-quite-soon-1.2025405
Something going on here
Glad I topped up yesterday but anyone know what driven the jump today?
Jupiter, down to 4% holding now from 12% over the last quarter (and 25% prior). I suspect they will exit this quarter and the downward selling pressure will finally be relieved. Assuming all goes to plan in April I think we could see a significant re-rate.
Starting to move nicely but I think there are a few possible pitfalls. Not convinced interest rates will fall as quickly as some are predicting but if they do it could benefit Klarna etc
Hope this one cheers you up
https://www.proactiveinvestors.co.uk/companies/news/1035402/klarna-s-valuation-still-way-below-ambitious-ipo-target-1035402.html
‘Little’ being the operative word! Fell asleep at the wheel on this one down 58%…. Would see breakeven here as a massive bonus
And the bit you missed out :
Completion of the disposal, which is subject to conditions, is likely to take a number of months; a further statement will be made in due course.
Portfolio Update
The Company can today announce that it has visibility over a likely disposal at a valuation that, if applied to the Company's Net Asset Value ("NAV") as at 30 September 2023, would imply an increase of approximately 5.5 pence per ordinary share to the Company's NAV.
Also wanted to ask if anyone had any ‘sensible’ thoughts on WeFox? Valuation arguably a tad OTT but new CTO with a decent track should mean sustainable growth. This needs to be a success at c.17% of the portfolio.
Just watched Matthew Beesley talk about Jupiter’s exit and the reasons. Strikes me there is a scary lack of understanding about private markets from institutional managers with retail investors as their audience.
Valuation issues are complex yes but I don’t understand why folks haven’t seemed to learn from the mark-to-model / mark-to-market shenanigans from 2007-8, or why Jupiter were involved for so long when their clear lack of experience in private markets seems to have added multiple burdens instead of adding efficiencies.
Good luck to Richard and Nick, let’s see that discount narrow significantly by Q3 ‘24!
All change. BOD becoming galvanised by the forthcoming continuation vote. Their jobs are at stake after all! Seems they have decided to facilitate a move by the managers away from the Jupiter umbrella and towards a new, independent entity. Personally, I think they should've taken this opportunity to reduce management fees further. Instead, apparently our managers require extra supervision... so charges increase by 5bps to fund "an enhanced risk process".
They say that "the reduction of various Jupiter-managed holdings in Chrysalis" is an issue which needs resolving. But then, in the rest of the RNS, they don't resolve it...
Rofert - 45p a share - see https://open.substack.com/pub/theoakbloke/p/dont-chry-for-me-argentina
From the Telegraph - 'Klarna, ... has recently set up a UK holding company, an early step towards a flotation that could value it at more than £12bn.'
So what would that make CHRY's stake worth?