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Based on a pre-market SP for BAKKT of $12.1, the NAV is approx 114p, an 18% premium to the SP of 93.6p.
Interesting to see that VSL converted its warrants into BAKKT shares. It now holds 3,961,389 shares with gross value of $47.9m. Using a 30% discount takes this to £25.3m which equates to approximately 9p of the overall NAV.
Guitarsolo,
BAKKT is in the books (as at last month end NAV, ie as at 30 Sept) at $21.4m which is roughly 5.7p per share. Based on current BAKKT SP of $28.8 and discounting by 30% (as the company does, not 20%), this holding is worth approx 18.6p per share. So total NAV is approx 129.5p and SP is at 95/96 implying a discount of 26%+.
The interesting investment opportunity could be next Sept but maybe again in the Spring of 2023 as the company has said it will buy back 25% of shares at NAV if the discount stays high.
whitelye, Not only it is classed as an asset it is the company's biggest asset. There's no question as to whether it should be considered as an asset. But there is a big question as to how the company values it and how shareholders value it. I think this is probably the point you are making. From a company perspective, they will include the asset but will discount this value by 30% to take account of tie in period, size of holding etc. The NAV released on Friday (in respect of 30 Sept) of 110.9p includes $21m of value. The NAV that the company will publish at the end of November but in respect of end of October will be in the region of 135p per share I suspect.
But shareholders will remain very wary given the huge volatility in BAKKT so the discount between SP and NAV will remain very wide. The SP has already gone up over 10% (87p to 97p) based on the rise of BAKKT but obviously this 10p is way short of the increase in the NAV, hence the increasing discount being around 30% as we speak. Until the BAKKT SP settles down into a narrower range the VSL SP will struggle to make much ground. The next year (until value can be realised) and then the following 8 months (up to when Board agreed to pay out 25% of shares at NAV if discount is greater than 5%) will be very interesting times for VSL shareholders!
At close (4:30) yesterday, the NAV was around 129p and the share price around 95p, a discount of 26%. But the NAV went up by another 12p per share between 4:30 and the US close at 9pm. Bakkt went from $28 at 4:30pm to close at $42.5. Again this highlights the crazy volatility that we are facing. So if the NAV is up 10p+ since close on Friday, at what price will VPC open on Monday? Around 100p is my guess. I wish they could realize this value now rather than in a year's time.
And to highlight the absolute values, Bakkt is in the Sept NAV at $21.4m. But full value of the Bakkt holding at US close is $178m. For a relatively small investment trust with a market cap of only £264m, this is an unusual situation.
So based on today's NAV notification, the NAV at end of Sept is 110.9p but the BAKKT deal adds a further 15.7p taking it to 126.6p other things being equal. This is based on a closing bakkt SP of $25.61. Therefore the shares at 95p are on a 25% discount to NAV which is probably a bit on the high side. I would expect the company to try to narrow this discount if it continues.
According to analysts at Liberum this event translates through to “a NAV increase of c.17% for VSL based on the latest share price for Bakkt and assuming a c.20% discount to account for the lock-up period”.
I think Liberum are being a little cheeky using a 20% discount when VSL has stated that it uses a 30% discount. But I can arrive at Liberum's 17% using my financial model. So 2.22m shares at closing of $29.4 = $65.3m. At 80% this = $52.2m. Translated to GBP = £38.1m. It is already in the books at $15.5m (£11.3m) so uplift is £26.8m which is 9.6p per share. There are 2.697m warrants and using Black Scholes method these are valued at $48.3m discounted by 20% to $38.6m (£28.1m). In the books at $5.9m (£4.3m) so gain of £23.8m which is 8.6p per share. So total gain is 18.2p (9.6 + 8.6). Previous NAV was 108.5p so an increase of 18.2p equates roughly to 17%.
I've crunched the numbers and I come up with an increase in NAV of 15.2p (shares 7.9p, warrants 7.3p) based on BKKT closing share price of $29.4, an exchange rate of 1.3723 and both shares & warrants discounted by 30% (as VSL does). The biggest variance is my value of warrants verses the method adopted by VSL. Mine is a conservative method simply taking the current differences from SP to strike. Given that the share price has only risen about 6p, this deal has actually increased the discount. I've also looked at Black Scholes method for valuing warrants and I potentially come up with a slightly higher amount than above. But there are lots of variables (eg volatility) that one has to guess at. For the record my 7.9p for the shares matches the methodology used by Stifel, ie I also had 5.6p uplift caused by the shares when the SP was $23.78. So the 7.9p is solid. Value of warrants less solid!
I don't like the risk/reward balance at the moment. I just sold out at 90.21p.
Good luck all.
Apologies for some of the typos and poor spelling. Should have read it first!
Hi Lucy,
Thanks for your response. I think you are right in saying that is a lack of further catalysts such that the downward momentum has ceased. SF have thrown all the mud they have and CSH is no longer engaging so I can't see much more negativity for the SP in the short term the NAV of 108p maybe an aggressive valuation but I don't see that changing for the next update. As you say, the lack of an insider braking ranks also limits the downside.
I see a drifting in the 90s for a while now. Nothing to drag it much lower but sufficient reservations to take it back to 110+.
My new average is 88.9p so I was partly out today at 90.45p and I will clear the rest towards 95p I hope.
Lucy,
Genuine question - do you think there is much more scope for shorters to make much of a profit from here? It seems to me that the SP has settled after the run of disclosures and it is difficult to see it drifting much further given the dividend is secure and assuming that the next NAV update is consistent with the past, ie 108p+. Surely the likes of Shadowfall have made their money on the drop from 120p to 88p?
That wasn't a buy or sell necessarily. It was the UT.