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I think the market knows exactly how to value it. Similar across the board. Look at SMT at present. The unlisted portion of that portfolio is getting hammered as well - you can see the listed NAVs etc. It's always more difficult when 'sentiment' plays such an important part in the valuation - if you have something that returns 10% ROCE, 5% dividend etc it's a lot easier to come up with a value. When the entire return is dependant upon profit on sale / IPO etc there is going to be a lot more sentiment involved.
I think it's likely we will see the UK based rate increase by at least 0.25% this week, more than likely 0.5%. The US is more likely to increase by 0.75%. That would leave UK rates at 1.5% if the larger of the two - still very low by historical standards. Along with the tax increases and inflation though, enough to have a significant impact on spending. Hopefully (once higher energy costs have fed through), the inflation rate should moderate over the next 6-18 months.
Not convinced it will happen though. In reality the cash on hand is pretty low given nature of funding requirements. Funding requirements can come along pretty quickly without too much notice. In addition to that the chance of bringing in new investors to an investee company are often dependant on current participation. Not having cash on hand to invest can have serious consequences if alternatives aren't available. I would imagine they will be prudent and keep on hand for as and when required.
Given the amount of on hand cash and share discount to NAV - if the NAV stands up it would make sense for the company to purchase it's own shares - this would close the discount significantly and reduce volatility. In addition to this if the share price represents such excellent value I would also expect the directors to be investing substantial sums. We haven't seen either so far. In reality we might see the odd director purchase, but nothing significant in my view - we should be out of the close period now so they can invest. Most will however likely be exposed via 'carry' which possibly explains lower levels of direct shareholdings in the parent. Not sure how that works at Grow. Just a volatile market that doesn't favour these types of companies at present - i.e. not making a profit / cashflow negative.
I am not referring to those - I'm not referring to what's gone up / down etc in the last valuation round. I am referring to the companies that go bust/ don't make it / cease trading during our period of investment (or get sold at a huge loss). There will always be those companies - it's a part and parcel of VC investing. No VC avoids them all and we won't either. That's just early even mid stage investing.
Agree. You will always have duds - a fair few of them. Just need the few to do really well. That's the model.
There will be a lag on any changes in valuation - it's slow motion from a realisation perspective in the private markets. Much faster when quoted with Cazoo and Ui Path good examples of that, Trustpilot too. It's not just those (Cazoo the worst though by a mile) - it's market wide, with the exception of big winners. Thought machine has trade backers so won't (unlikely to) suffer - it's non consumer as such. That could be a big winner - it's the ones that aren't we should be worried about. I don't know what Revolut is held at NAV wise - if it's the same as the last round then I think it's overvalued. The US is getting smashed at present - well Nasdaq is anyway. Lots of companies overpaid for acquisitions. Cazoo is close to $1 again - I personally don't think Cazoo will be in existence in 2/3 years. I'm also not convinced by Allplants as I have said before. Defintely some winners in our portfolio but in my opinion we have some that are unlikely to succeed as well - without the froth of 2021's market they would never have been funded in all likelihood - but then again that's technology - a few big winners end up prevailing and a lot come to nothing or not much.
I read it differently to you. Overall we will return roughly 20% across the cycle - that's going to be volatile though and we don't really know what's going to happen in future but operationally all ok. They can't predict valuations any better than the Fed or BOE. The market will decide on those. You can't issue a warning on a decrease in NAV as you don't really know it's coming as such. Profit warnings arise when there are known factors likely to lead to a decrease - they can argue that the funding round in 12 months at a lower valuation wasn't known etc. That's not misleading - it's just not prudent and results in share price volatility and large discounts to NAV as people don't believe it.
He notes 20% annual fair value growth across the cycle - if the gross fair value growth achieved during the year of 37% (FY21: 51%) was achieved, then if you take a 3 year cycle you would infer we will be down 28% roughly this year - that statement isn't inferring 20% annually - evenly. They are saying they are building a business which over time should do 20% but it will be volatile - volatile means up and down.
My view - it's probably a lot more sensible to buy at a significant discount to NAV than it is a premium. Investments like this need very specific (almost too good to be true) market conditions to command a premium. If the NAV holds for the next 12-24 months this will be a good buying point. If it comes off circa 30% (NAV) that means there is still a discount of 25-30% at today's prices or about par if NAV decreases 50%. That seems like a reasonable proposition. That will however depend on markets more broadly.
they could never liquidate at a reasonable price - if things got to that point market wide a lot would go down and have very little value. We aren't there. The cash is a little bit of an illusion - a lot of it will be committed - there is always going to be a cash balance given sales / purchases etc. It's not just spare cash that sits there as such.
Potentially - I am concerned that we haven't yet shown a fallback in NAV. I want that to crystallise a little more. If we rushed down to circa £3 I would likely buy in. I don't see that happening at present, barring market wide collapse. I personally think something like Revolut would be lucky to list at $10bn at present, let alone it's last round valuation. That's only one company but as Steph said - they have raised revenue multipliers on part of the portfolio - in this market ?? These are revenue multipliers not p/e. I will watch and wait for the moment. I think the Nasdaq could fall another 20-30% and this will fall in sympathy regardless of whether it should or not. That would take us below £4. I would start to look at a lot of things at that level, particularly profitable, cash flow positive technology companies where valuations had come down to lower p/es. I would also look at buying Grow - I don't however see a quick recovery in this sector. I think we potentially have further falls to deal with, along with a slow / muted recovery. In that mix we have persistently high (not transitory) inflation. That muddies the waters. If I am honest though that update didn't provide me with clarity - just lots of questions around why we are different. There isn't enough transparency on valuations to get away with that.
Very small = circa 0.5% of portfolio coming down from 8% at it's peak.
I have a very small holding in this now which I added very recently - albeit at 10-15% above where we are today. I did sell 90% of what I had a good while ago - not at the top admittedly. Around an 850p average. All I have now is a 'toe in' at present. So rationally you are correct - I have sold most of what I had. Nothing weird about monitoring a stock that potentially has value at some point in the future. I sold as I believed I would be able to buy it more cheaply. I always buy in tranches so will look to increase at some point.
There won't be any clarifications at the AGM - it's impossible to clarify on something that is an unknown. Also there won't be anything there that isn't in the annual report. I personally think they have made an error by not realistically/clearly guiding down for future NAV. Will come as more of a shock and we will get punished twice - now and when it actually happens.
No fund manager / VC / PE would or should say that. They have no way of knowing they will get to 20% at all in a given year / period of time, returns across a 10 year period etc yes. If (and I don't have time to look for the statement) they have said that then it gives me even less confidence than I currently have. It suggests a lack of prudence with respect to a statement - I read it as across the cycle - that means and directs towards falls - basically they aren't here yet given the lag and the way we value but they will come. Personally - I think we have further to fall.
The reason isn't that solid at all to me - basically there are a lot of valuations that will be driven downwards by delayed correlation between public and private markets. They are hoping things come back prior to this happening - it won't - it will likely get worse before it gets better and we will take a massive hit. Nothing in there that makes me feel good about this. Revolut is obviously overvalued - NAV heavily reliant on that. I think you and I are reading a different set of results. NAV is going to get hammered at some point in the future. Prudent - we should recognise upfront. If we anticipated increases in Thought Machine and Aiven, then why not anticipate some of the decreases?
Public and private markets are closely linked, but they nevertheless operate differently. This lack of correlation can be explained by the contrasting funding cycles and valuation periods. Global events will have an impact on both public and private markets, and while often with a lagged effect, we are seeing some impact of this in private markets, particularly at the later growth/pre-IPO stages - given this has yet to have an impact on Grow's NAV to me this is a warning that it is going to.
The gross fair value growth achieved during the year of 37% (FY21: 51%) was principally achieved by our Core Companies, reflecting growth in the investments made in previous financial years, both through financing rounds at higher valuations and revenue growth, offsetting the fall in valuation of our publicly listed companies at 31 March 2022 - suggest they can achieve 20% across the cycle - given returns here that means a negative return over the next couple of years is highly likely as will likely revert to mean.
I sold 90% of my holding in this at an average of around £8.50, not the best price, but not bad either considering I could buy it back considerably cheaper today. Bought a little back at £5. Staying on the sidelines mostly for the moment awaiting news.
I am not concerned a bit re long in oil. As I said the whole purpose of this is to hedge my own energy costs. One goes up the other goes down. Broadly breakeven. Plus I get dividends in between. I don't invest in risky oil plays. Oil has always been volatile - even without war. I'm not betting the bank on oil remaining where it currently is. I don't pay to hold my position, I get paid to hold it in dividends. Part of my overall income pot. A good oil company will continue to make a profit at much lower prices than we are at today - today's prices are however a welcome bonus.
My bet - the NAV will decline or at least the outlook will be in that direction. The winners will be emphasised but there will be only minimal discussion of any declines or failures. Always the way.
Had a look at those Lucid cars - very expensive and ugly to me - if you're in the market for an S class merc or 7 series BMW you might be a buyer. I want a small SUV that can transport the kids with a real range of circa 500 miles. Problem is all of the long range battery cars are massive due to need to fit large battery in. Parking a Lucid in the local swimming pool car park or Village here would not be easy ! Fine for the US though, can't imagine they will sell well here.