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Good RNS today. Feels like we will move away from recent lows and move up especially if IPO for Nanopore goes well in Q3
Shanders: Thanks for this. As I wrote previously, I’m inclined to treat gosh-look-at-this, puff-piece articles about IPOs in the press with a high degree of caution. Investment banks have an incentive to 'talk up' the price of a prospective IPO, to curry favour or win business from the company, just as estate agents will b*llsh*t about how much your house might be worth, if you were to use their services.
Looks like some scope for upside is definitely possible after SUPP recent lows when Oxford Nanopore IPO goes to market in Q3
Wealth Manager
Schroder UK Public Private (SUPP), the ‘patient capital’ investment trust formerly run by Neil Woodford, hopes a £3bn-£4bn flotation by top holding Oxford Nanopore can turn its fortunes around after a painful 20% write-down this month.
Fund managers Tim Creed and Ben Wicks (below), who took over the closed-ended fund at the end of 2019 after Woodford resigned when his business collapsed, expressed strong belief in the British DNA sequencer. Nanopore accounts for 21.6% of the trust’s assets, making the stake worth £68.7m. Its plans to list offer a big potential boost to SUPP’s 31 December net asset value (NAV) which this month was slashed to 35.01p per share from 43.84p at the end of September.
Reaction to that has left the shares at 31.9p, less than a third of the 100p level they launched at six years ago.
The pair told Investment Trust Insider they held Oxford Nanopore at a valuation of £1.9bn, reflecting its last financing round more than a year ago. This is less than half the £4bn analysts at Berenberg have said Nanopore could achieve when it launches an initial public offer (IPO). It’s also less than the £2.3bn IP Group (IPO), a listed early-stage investment group, held the company on its books at the end of March.
Creed and Wicks would not be drawn on making projections but noted how Nanopore’s reputation had grown during the Covid-19 pandemic when its devices were used to track the spread of the virus in more than 85 countries.
‘It’s been nice to see the range of projections that other people are making and certainly we have a lot of confidence in the management team of the company to have a successful IPO and the continue to grow,’ said Creed.
He added they would not be ‘forced sellers’ when Nanopore goes public, as the limits on position sizes in the trust only apply to new investments.
Investec analyst Alan Brierley estimated if Nanopore floated at £3.9bn, as recent reports suggested, this would hike the trust’s NAV by around 23%.
Having gone through the recent annual results, it's obvious that the share price either 'bakes in' a very healthy valuation (>2x currently booked value) for Oxford Nanopore at the proposed IPO, and/or investors are willing to accept a much-narrower-than-usual discount to NAV. Either way, SUPP is basically at no better than fair value at the moment.
Casc: your second 'if' is a big one. Don't necessarily believe everything you read when it comes to IPOs - see Deliveroo.
If it is true that that 18% of portfolio is in nanopore and if it is true that nanopore value will be 250% higher than current at ipo.. this means that the total portfolio value should increase 250% X 18% = 45% increase in the portfolio due to nanopore assuming other assets remain unchanged. Let me know what I'm missing
Well, as far as we can tell Industrial Heat has been marked down to near-zero already, and yes maybe there are a few non-written-down, zero-value-really duds in there still.... but that's the nature of early-stage, venture capital investing, no?
is an utter joke.
Industrial heat is a zero.
As are many others.
The warnings about this have been posted ever since SUPP was launched.
Ignore the warnings if you want, I don't really care and am only posting because I held this when it was WPCT, but I can pretty much guarantee more write downs will come.
The half-year (30th June) report has: "the partial realisation of the Company’s holding in Oxford Nanopore as part of a strongly supported fundraise at an attractive valuation".
So, there was a partial sale, with some valuation uplift to the residual holding. Not clear (to me) what proportion was sold. I would need the end-2020 annual report for this.
From the Oxford nanopore website:
-In March 2018 Oxford Nanopore raised £100M ($140M) from global investors
-In 2020 Oxford Nanopore announced that it had raised £29M + £49.4M +£84.4M in new capital in three tranches
From the most recent SUPP annual report (31/12/19):
- 4% of nanopore owned (rounding means that the % could be 3.5-4.5%)
- Fair Value of £74,847,000; Cost of £57,749,000
At 30th Sept 2020, FV was £68,707,000. It is not clear whether this diminution in value is due to a sale (cannot find any announcements to this effect, though it would have been an easier sale than much of the portfolio), or a lowered valuation (possible, though seems unlikely given Nanopore’s apparent overall good progress), or perhaps a combination of partial sale and some uplift to the residue.
I note that IP Group, the largest shareholder, sold a partial stake in 2020 (see IP Group Annual results RNS of 10th March). It is not unlikely that existing holders are generally reducing their holdings, e.g. to raise cash and rebalance their portfolios.
I note also the following from IP Group’s RNS “we have concluded on a fair value of £340.3m for the Group's 15.0% undiluted shareholding, an increase of 29% during the year”. This implies an overall value of £2.2bn, i.e. 1% of Nanopore is worth £22.7m currently. So, if SUPP has (somehow) still got 4%, that means an end-Dec 2020 value of c. £90m, with an overall NAV of 37p and discount of 13%.
I’m inclined to treat gosh-look-at-this, puff-piece articles about IPOs in the daily press with a high degree of caution. However, let’s assume (for the sake of the argument) that the IPO price is x2 the current valuation, so that the stake will be worth c. £180m. By my calcs, that would take the SUPP NAV to 47p; so, the current sp is at a discount of 32%. Obviously, if SUPP’s stake has been reduced over the year, and/or they’ve already applied a valuation uplift, then the impact on NAV will be lower.
Personally, given the degree of uncertainty about what exactly the board has been doing, and their slightly haphazard approach to announcements, I am inclined to stay away until the audited annual results emerge.
In short, we need to know the basis on which the original valuation was based that produced the £68.7mln.
But even then the eventual valuation will be a guess until the IPO price is revealed.
Casudi –The NAV for 31 December states that “the valuation was based on the last financing round and has not been adjusted for over 12 months”. The valuation of ON was £68.7mln as at 30 Sept 2020 according to the RNS dated 3 December so presumably that is the same value at year end.
https://www.theguardian.com/business/2021/mar/30/oxford-nanopore-to-float-on-london-stock-exchange
according to this article the value of nanopore should be 2 or 3.5 times higher after ipo...
so does it mean that 57m£ could become 200m£?
if this is correct than the equity will see an increase of +62% from 35p
let me know if i am making some mistake...
supp announced that their equity is 35p per share so this means 35p x 909m (share in issue) = 318m£
so nanopore investement should be around 318m£ x 18% = 57m£
is that right?
https://www.hl.co.uk/shares/shares-search-results/s/schroder-uk-public-private-trust-ord-gbp0.0
almost 18% of their porfolio is in nanopore.. according to this data
Prophit, I was hoping that someone here could give us an idea of the potential uplift of the stake in ON.
Personally I don't have the ability to track the movements through the multiple funding rounds that ON has completed.
Being cynical, it looks like our managers want us to play a guessing game in order to limit the fall in our SP that was triggered by the published NAV revaluation.
I couldn't find the number of shares in Nanopore held (I doubt whether this data point is publicly disclosed). However, though I have not done it, it may be possible to infer the number of shares held by comparing Oxford Nanopore accounts and other disclosures filed at Companies House with the holding valuation information disclosed by SUPP.
Presume you're looking to get a better fix on the value of the Nanopore holding?
Does anyone know the number of shares that SUPP holds in Oxford Nanopore?
The RNS says NAV of 35p. Maybe add another 2p on for Nanopore, the booked value of which is too low, given the likely IPO.
At a sp of 32.3p, this gives a discount to NAV of c. 13%. This is rather narrow for a VC portfolio, so expect the sp to slide further. Obviously, the higher value one ascribes to Nanopore, then the more reasonable the discount becomes.
Read the RNS from yesterday - very disappointing.
NAV update not showing on their website yet. What is it at now?
Reading between the lines its impossible to know what the holdings will be in a years time. The new manager knows most of these are dogs, the worst being " Industrial Heat which has been revalued due to a lack of technical and operational progress;"... right lack of operation progress... as its supposedly breaking the laws of thermodynamics, good luck!
Really is a wait an see what the holdings end up as, until it becomes investable, just my two cents. " the Company has refinanced its credit facility to place it in a strong financial position enabling the Portfolio Manager the opportunity to improve the portfolio's diversification going forward."
I would suggest that the board's news-flow management has been at best mediocre. There have been a few positive-seeming RNSs recently, e.g. Rosetta, Immunocore, Kymab, as well as the forecast Oxford Nanopore IPO. And then...this sucker punch gets released at 3.32pm. (I realise that this is a function of the financial statement timetable to some extent, but still...)
I'd need to have a good hard look at the annual results & report before increasing my exposure here.
At least the booked value of Industrial Heat is incrementally being written down to a more realistic level, I suppose...
Well, that was disappointing, and what's with the 3.32pm Nav announcement - I only picked this up this morning !
Not too disheartened though, still feel there is better news to come, but what do I know !