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AVI did not get out at a profit. They are nursing a loss which the accounts clearly show. Plus they are not out
Fir me the low do has 4 main explanations:
1) we were well overpriced between launch in 2016 and 2022 and are correcting. nav in 20016 to 2020 was overstated.
2) all the exits (nearly half a billion) in 2021 2022 have been wasted when reinvested with little retained value plus test of portfolio doing poorly.
3) we have serious trouble in a majority of the core portfolio and the seed funds, trouble not yet talked about in public realm.
or 5
4) temporary irrational anxiety that will pass
Trump might actually be in breach of Stock Exchange rules with the SPAC that floated. Not that such things seem to matter to the "stable genius". Markets seem not to care if he is elected. If he is elected in 2024, I wonder if there will be a 2028 election.
Bear markets can last a lot longer than 18-24 months.
Remember the Lost Decade? Or speak to some that invested in Japan 20 odd years ago.
Peel Hunt were suggesting today in the FT that the UK market is going to end up like a stagnant backwater akin to Ireland's.
I would like to take on more risk with US stocks but they are facing a lot of political risk.
If Trump gets in he is talking about shutting down Federal agencies like the SEC, which I don't think the market would like.
Also a massive chunk of the SMT private holdings are in SpaceX, Bytedance, Northvolt and Stripe.
These are massive profitable companies and their value is not really in question.
So comparing the discounts doesn't really make a lot of sense.
Besides no one is going to make an offer to buy SMT, whereas someone could decide they want to buy the MV assets.
As we know, markets tend to move en-bloc and more often than not play "follow the leader". So, where US has a good day it is followed by a good day in Asia, then Europe before opening again in USA for the cycle to start all over again.
This year, the S & P has had a great start albeit that it has slipped back a little as investors take a breather. After all, January, February and March saw an uplift of 11% which has now slipped back to 8.5% versus the FTSE that has only just got out of bed with a gain for the year to date of 2.26%. It had been in negative territory for most of January and February. In turn, investors are shunning the UK in favour of holdings over the pond. I am one such investor where 15 of my top 20 holdings are quoted on either DOW or NASDAQ.
Again, returning to the broad direction of markets - these have for the last 100 or so years risen, though, of course, not always evenly. Crashes happen as do recoveries. Bull markets run out of steam and even when things are rising rapidly, there are down days, and sometimes quite sharp drops. These pauses might last a day or two, perhaps a week or a month but don't immediately herald either a crash or the savagery from a bear market.
All the bear markets I have been invested in tend to be of 12-18 months duration whereas the bull markets tend to be from 3 - 5 year runs and some even longer than that. Markets are in the first 6 months of a bull run and investors (especially those accross the pond) tend to get carried away in an election year. Having become a little frothy, I am not surprised to see the froth scraped off. What I am a little surprised about is that it seems to be taking an age for the tiddlers (such as those that GROW invests in) to get off the ground and either out pace the behmoths or at least show themselves to be nimble in finding new opportunities to exploit.
AVI bought in when the price was at all time lows. They may have been aggrieved by the dilution from the raise. Either way they exited with a profit.
Liontrust recently bought a lot and BlackRock were happy to pay 280p.
Do you think BlackRock didn't do any due diligence?
SMT is a good indicator as it is the largest IT in the UK and much more liquid than the rest. Their 7% discount to Nav is 26% when all applied against the private portfolio. Their listed stocks which are about 72% of the portfolio are very large and liquid so should be no discount there. SMT's private investments are also the largest of the private companies and in many cases are very unique. If they are at a 26% discount then I think it fair the cos in Moltens portfolio are at 50-55% discount as they are much much smaller and earlier in their progression. I think that is what market is doing, taking its lead from the bigger names. The big guys will lead the recovery and we have seen some of that already with SMT but the thing that could drive things lower is if the US Semi and Tech sector rolls over. semis had a bad day yesterday and the unprofitable tech and even the large tech. My advise is be careful when your conclusion tells you the market is wrong. Of course it gets things wrong but it is generally more right than wrong. If you take out 3i and Bridgepoint from your analysis the average PE discount to Nav is 34%. Yes, Molten one of worst. It has a terrible share register and i think annoys a lot of people with the way the external carry valuation has gone relative to the share price. That is a real slap in the face to shareholders. If I wa an IPO investor I would be furious. Also AVI, the specialist in discount trusts has been a seller recently from 7m shares last Autumn to lessthan 5m. Care is warranted, its not as cheap as it might appear.
Woodford spooked investors in our sector as well as FCA oversight which is now clearly over the top.
you would think smart money would immediately exploit the arbitrage opportunities of sentiment based low share prices but even in theory they may choisecthe best timing allowing sentiment based declines to play out in full first. some might even deliberately accelerate sentiment based decline in thin traiding to get a better buy in price.
ricardian economics it us not
I wonder how much of this is down to the after-effects of the Woodford scandal, leading to a general distrust of funds dealing in unquoted companies.
It is very odd how retail investors (and I am of course one) are usually worried when share price languish for months at prices that seem illogical. After all, it is not as if every one of the holdings will go bust at the same time or has equal qualities in perfect market conditions.
Overall, the “price” of 100p value of shares in GROW can be purchased for 50p at the moment and yet turnover in shares remain muted and there is no appetite for the retail investor to accumulate.
I think it comes down, in part, to psychology. I discipline myself to try and buy either on the same day each month or force myself to buy on a “heavy” down day (FTSE falls 2% or more). The version of me that feels most comfortable is in a rising market where a trust is trading at a premium to its assets and I “know” I have done the “right thing”.
Investing is a long game and the longer it goes on, the more players are involved. Popularity might be as simple as counting the flies on a turd. The juiciest ones are the freshest and even better if the source is highly prized. Unquoted companies are out of favour, the appetite to float is missing and interest rates a couple of notches too much for risk to be lowered.
A May bank rate cut seems to be diminishing, though June is looking more promising. I think that rate changes might be the catalyst for a change in sentiment
Very best on the market for an ISA with a 5 year plus time horizon.
what will happen in the next few months, year or two of course uncertain. For my money it will sooner or later (but not later than 3 years) recover to previous SP so I don’t want to be on the platform when the train finally leaves the station.
Steph
Thanks for the explanation and good luck!
I also have some and it will be good if they can get back to over £10
i thought grow had the closest alignment with my own investment preferences by geography, sector and balanced exposure to the full development pipeline from pre seed to ipo.
i wanted a uk/eu strategy (usa overpriced for vc tech). i though by grow having circa 69 core companies in the different geographies and sectors and over a 1000 seed companies grow was quite diversified already. no need to diversify within the sector further. also i like the fact grow are active portfolio managers often sitting on the boards and nursing seed companies through to funding rounds. should give grow superior stock picking abilities to others who are usually one man/woman fund manager type funds. indeed core portfolio doing better than sector (few failures) but that success not priced in. extra admin costs of active investor-ship minor compared to gains of good quality informed decisions.
i also theorized (falsely) that volatility would be plus or minus 30% of a fairly steady nav/share. i did not see teh circumstances of nav/share downgrades without quite a screw up on key core companies which we have not had. i thought nav/share increases might only flatten in a bad market not dip.
i certainly did not see a 67% discount to nav/share persisting for any length of time as it has for over 1.5 years. i thought worst case a discount of that scale would be a flash crash such as we had march 2020 in the covid scare.
kknowing what i know now of course i should have been more diversified even within this sector. i did put a small amount of money in rolls royce at 80 feeling it was a technology stock in a industrial wrapper. i was right but did not hold much conviction on my analysis on rolls.
i am where i am. my best shot of getting back to break even and beyond in the next 2 to 3 years is to hold. nothing else on the market is likely to double or *****uple in 3 years. once back at 11.82 sp i will diversify regardless of my preferences and hold about 1/3rd of my isa portfolio in grow but not until then. wish me luck. at least we have not been diluted in a way that we will never return to 11.82. with the portfolio’s natural (and fast) organic growth at some future point we will get there.
I politely disagree. If you value the Pref correctly at say balance sheet date, its value is the liquidation value plus a call option on the ordinary share value at the conversion strike on IPO or takeover. It is not the value as if everything was converted because that conversion is contingent on IPO or takeover. Also most Prefs have no voting rights, how do you value this aspect? very subjectively I would suggest. The one thing market hates is uncertainty and it will always apply a big discount if you cant answer the basics. As Molten signs NDAs they cant answer in detail and hence we get the fluff they come out with when asked. You seriously have to question whether this information asymmetry is appropriate for a listed vehice? How can the hired help know more than the owners?
Steph
Why is GROW the only share that you are interested in ?
Do you not think that it is sensible to have a diversified portfolio instead of being 100% in Venture Capital ?
GROW has fallen by about 80% in recent years and so it has not been a good investment
Or what about investing in other VC companies ?
If you are only interested in VC do you not have any interest in diversifying in to some other VC companies like Augmentum or IP Group ?
Sad. Our SP is at such a discount it matters not if we have preference shares or not. I doubt the market giving much value to them at all at the moment. Of course our NAV calculations will at the margins take them into account but the market does not believe our NAV calculations.
I wish I was investing fresh and not well under my average buy in price (currently about 5 quid) but I still expect to be in a 100% profit within 3 years if not sooner. Wish not so many black swans swimming about. Israel, Ukraine, Trump, the list goes on.
Interest rates coming down and this is not priced in for our sector yet. I expect inflation to fall faster than predicted -especially if oil price eases as I expect with increased supply stimulated by high price itself. Also Saudi will get tired of the 2m barrel cut.
The valuation asymmetry will never be solved until the terms of the alphabet of Rref shares is standardised. There is absolutely no way anyone outside the negotiations can value the different prefs until you know the precise terms. Even theterms of a pref A from co. 1 can be different to Co.2. If it going to be held by a listed entity the allowed terms need to be standardised, otherwise the valuation debate is impossible. most retail investors dont understand the range of terms on these Prefs. You cant just assume they are all converted and value them the same as they are valued as at a particular date be that semi or annual.
Bought a few back at 230.
There is a regulatory problem to fix for retail wrapped illiquid assets. Can’t see why GROW feel constrained on this but regulation would oblige them.
We should be able to see clearly how many shares in the core portfolio companies we own and know how much is our valuations on the books for for each core portfolio company. That facilitates the correct level of “caveat emptor” as we can look at what those same companies are on the books for with other funds and with basic information such as sales, sales growth, sales margins and multiples of sales to valuations (pus of course the intangible spice of sector specific IP and “know how” ) we can do our own crude analysis of component company valuation.
The FSA has a legitimate concern -even if it is too Woodford closed fund trust structure based in it’s anxiety. If valuations of component companies in the trust are a black box maybe the retail price does not reflect market reality and a warning needs be issued of some sort. It is this obligation to warn that seems to be substantially deterring institutional investor into GROW at the moment.
In reality the retail wrapper is highly sensitive to even the possibility of NAV downgrades (I have been saying too sensitive) but FSA operates in a theoretical world.
So we have the worst of both worlds. FSA forcing funds to warn of potential losses the retail price already has priced in and more. Stupid.
GROW management can put out more component specific information in the meantime. They are only constrained by their agreements (probably informal ) with the component companies and not the regulator. Can’t see why we can not have runway length, sales, sales growth etc for each component company so we can make our own judgment on NAV calculations.
Anyhow SP will align with NAV/share once the market stabilizes for late rounds and IPO bit of pipeline. NAV/share will jump as well when that happens from our current circa 700 to something significantly higher based on underling company company sales growth and the maturing of some seed funded companies coming through the pipe.
One for the ISA for sure but in my view we are near a sharp correction upwards. Just can’s say when. Maybe on the year end results due out shortly.
Thanks Steph and others on this forum for some well reasoned opinions without mud slinging. My own 2 cents on this specifically I would want someone not in client relationship to provide a research note on Molton, so not Eddison.
Https://www.edisongroup.com/research/nav-down-c-6-in-the-first-half-of-fy24/32914/
Kazoo had no impact on half yearly results as was all fortunately sold. Ditto unfortunately for Uipath and Trustpilot who have been all sold off but have recovered a bit on the markets since.
I for one don’t want GROW to hold listed stock post IPO. I want them to exit in a late round or at IPO not after. This seems to be the policy.
Apart from Graphcore there's also Cazoo which many may have forgotten about it. I believe it's close to 100% loss on that one.
Quite right that with SP where it is anybody who invested in GROW at or after IPO in 2016 has lost money -expect the management. And in a sector that by all accounts has grown nicely (well above general market) since 2016.
I think part of this underperformance of the SP is just sentiment leveraged by the black box nature of the retail wrapper. I also think NAV calculations have been overly conservative which in good times is “petrol in the tank” resulting in SP premiums over NAV/share but in bad times leverages dark moods and reverse animal spirits.
For my money I an not even beginning to sell or diversify until we are 11.82 again however long that takes. I don’t see where the structural damage to the sector or the portfolio has been to justify the discount. As we did following the COVID recovery repricing once sentiment changes can be quick.
However, if one looks at NAV/share increases alone it has not done so well. GROW state 20% growth over the cycle which of course is compounded so NAV/share should be 4 to 5 times 2016.