Member Info for sageoflondon

To me that type of discount doesn't seem that out there in this market. For some of portfolio it's plausible they are worth a fraction of what they were valued at at their peak. If Klarna can fall from $45.6bn to $6.7bn in just over a year then there is no reason whatsoever that something like Revolut or something similar cannot do the same - I am not saying it will or has, but there is no rational reason why this cannot happen. That only needs to happen on a few investments to have a serious NAV impact. If that happens alongside a general 30% retrace than it's easy to see where the market is at.

Not sure Grow would have known about Microsoft's decision at that stage, but I could be wrong - I believe that was the primary influence on the reduction in the valuation - could mean we have more to come in that area.

I agree - barely started yet. A lot just won't come back for more funding etc and will die off - that will likely include a portion of the Grow portfolio. Just the way this works. It's fine having multiples of sales etc at 0% rates almost, at 5% when people aren't begging you to take their money things will look very different. The really good ideas will still run. Even some of those will suffer valuation drops regardless of success.

One fund - Ballie Gifford Schiehallion wrote down the value of it's Graphcore value due to Microsoft axing a deal - it suggested value of Graphcore had fallen by $1bn per the Times - how that compares to what we have it in at I don't know.

The whole point here is the majority of our portfolio is not profitable at all at present, and in many cases won't be for years. When rates rise that raises serious doubts with respect to the long term profitability / feasibility of many early stage companies. It's a lot easier to make money with rates at 0.25% than it is at 5%. A lot of early stage companies are likely to have to raise prices to a level that potentially call into question actual feasibility of the business model (cost inflation will hit things like Allplants hard, but will also hit technology companies badly due to salary inflation) - but no one really knows how bad this will get. Investors are ignoring the NAV - it's completely out of date and not that reliable a measure for this type of investment in these financial conditions. What someone was willing to pay 12 months ago is very unlikely to be what someone is willing to pay today. Graphcore has potential but it did $5mn in revenue in 2021 and $185mn of losses, versus a £2bn valuation - there is a lot of hope in that valuation, which may or may not come to pass. No guarantees either way. In all likelihood the real value is somewhere either side of that.

If you can get 5% guaranteed in a bank account why take the risk etc. I don't think this will be back to prior highs within a 5 year timeframe, let alone 2. That price has to be left behind for the moment. This could fall further, maybe it recovers a little, either way we are a long way from where valuations were 12-18 months ago and we aren't going back anytime soon.

as an aside (it doesn't impact the Grow NAV/share price much now anyway) - Cazoo is down almost 97% from its peak. 40 cents a share at present. Awful destruction of capital - quite how that was floated for $7bn I will never know. I can't imagine it will still exist 2-4 years from now - and it will potentially be looked upon as an example of market over exuberance - in much the same way as THG will, which is down around 96% from its peak - 96%! Revolution beauty - which is down just under 89%. Shocking. Again not directly relevant to Grow - but we will also have some of those in the non listed bits of the portfolio - just the way VC's work. It wouldn't be normal if we didn't. The next couple of years will be about what survives and what it's worth.

You did a little better than me - I have just calculated. I made a profit of 54.5% on these. My average buy in price was £5.08, average sale price £7.85 - thought it was higher, but is what the spreadsheet says it is. So I was a fair way off the top.

I tend to agree that these assets will likely suffer for the foreseeable future. Essentially early-stage, unprofitable firms, with no prospect of immediate return - but also potential susceptibility to liquidity issues (not Grow itself, I am referring to some companies within the portfolio and market wide). Even without liquidity issues, valuations will be under market wide pressure at present. Young technology companies are always going to be very difficult to value in this environment. Inflation is uncertain and currency movements don't make things any easier. I personally don't see a bid coming in here, unless a party has their eyes on a specific component of the portfolio and then they would likely purchase direct if available.

Looks like it's just CEO and Partner / Wife utilising annual ISA allowances - hence proximity to £20k?

A little tinkering here or there with tax will make very little difference to the direction of interest rates at present. Rates are going a lot higher in the next 3-12 months (globally), but particularly in the UK. The BOE was slow to react and is till behind the curve - potentially resulting in rates going higher than they might otherwise have needed to. The last 13 years or so have seen QE pumping up asset prices - let's see how managing that goes on the downside - particularly UK house prices. People borrowing 4-5 times income might work at 1-2%, but it isn't going to work at 4-7%. There will be significant pain, that will have a big impact. Eventually rates will likely come back down, but likely not for a couple of years. They are also likely to remain higher than the lows we saw during Covid regardless. 3-4% as a rate seems reasonably longer run. 5-6% on the high side.

But have you also looked at the cumulative retained earnings of that same company - negative $140m I believe - please correct me if I am wrong? It's going to be a while before that figure is positive. That is cumulative net earnings at a basic level...

That is correct - I couldn't currently buy the shares if I wanted to. I might be able to buy in AJ Bell but HL won't even let me check the price!

If NAV increases on this it just won't make any logical (or plausible) sense to me at all and the why/ how will need to be set out very clearly and transparently. It would be completely at odds with what is in plain sight everywhere else and doesn't make any sense whatsoever to me. It's very easy to follow broad accounting methodology etc, which will never be completely prescriptive. There should however be prudence and common sense applied. Most companies are avoiding raising extra capital at present because they won't to avoid exposing down valuations out of fear that investors take fright - that isn't a positive as it's more likely to result in liquidity problems further down the line - it also has the potential to increase the urgency of any future raise. We won't completely track US tech - there will be linkage but a lot of US technology shares - particularly the larger more established companies are profitable companies with significant barriers to entry in their markets - proven business models generating significant free cashflow. Start-ups, mid stage, pre listing technology is, on the whole, a significantly different proposition from a risk perspective. I can't for example see the Graphcore valuation moving up - that looks like it's retrenching somewhat, presumably the Revolut valuation will also pullback based on prevailing market factors. It's also very easy to hide (or defer0 the question as to whether long run profitability can really be achieved with the line that a company is growing to scale etc. when continual funding rounds at ever increasing valuations put more money on the table. That was the case with Cazoo - how much money was spent on the European experiment only for them to pull out. What was going to be a global titan of the used car market is now pretty much a UK operator in a space crowded with already successful cash rich / strong balance sheet competitors. So if the NAV increases, a significant component of that is likely to be the less transparent, earlier stage components of the portfolio where there is significantly less visibility to a retail investor. Such investments are always hard to value, even for the auditors who have no directly comparable market price or reliable yardstick.

Not sure the impact will last too long in all honesty. Rates need to go up faster - BOE moved too slow in my opinion.

I was also in Grow - with a really significant holding (for me), almost 10% of my portfolio at one point. I sold this a while back at around £8.50 average for the lot. Not the top by a long way, got greedy! I could see this falling to £1, not saying it will but it could very easily. I don't think we have hit anywhere near maximum stress yet and markets can react very irrationally. The returns available elsewhere with an across the board fall will take money away from investments like this - people trading uncertainty, for something generally considered a bit more certain - or liquid as you say.

I don't agree that this is what the share price assumes. The share price isn't just based on NAV. A large part of this is market driven and risk aversion, people not wanting to be invested in this company as they don't have confidence that it will hold up well in a storm overall, given the nature of the portfolio. The NAV here is completely removed from the share price, suggesting many other factors at play. The market is placing a much larger premium with respect to the risk associated with the portfolio Grow are invested in. A good proportion will fail in a normal market, the market has reduced it's risk appetite. There are going to be some bargains around for those with cash at some point.

In reality the share price here could go anywhere. It's lower than where I expected, but it is always going to be very volatile, particularly in times of market stress given the nature of the portfolio - i.e. companies that don't yet make a profit. (gross profit is very far from a profit) or returns to shareholders (other than potential capital gains).

More broadly it's worrying that we are now sub £3. That's without any real stress in the US......

It was never about trade agreements for me. I still wouldn't support EU membership. I am fully supportive of skilled migration and yes - we really need it and can easily absorb it. Skilled migration pays for itself in taxes and growth.

I would not want to be mid way through the purchase of a property at present - not pretty. Difficult to budget in this environment when you don't know what rates will be in a months time or when the transaction actually completes. I personally know of 2 offers that have been pulled as a result - and no I am not an estate agent!