Member Info for sageoflondon

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.

If Grow management believe in the NAV here why are they not purchasing their own shares given cash in the bank? More to the point why are management not filling their boots. Seems to be a no brainer if the NAV is correct. Thoughts?

When the next generation cars get here with a 700 mile range I might well think about it - providing they aren't £100k. They look like they are a way off at present though. A decent model 3 Tesla is quoted as around 350 miles which will go down 15-25% depending on temperature / driving conditions etc. Motorways are a big power drain hence state range is not that close to what you get in the real world. I currently get around 500/550 miles of range. If it can meet that I am happy. So 700 would do it but these aren't likely to be commercially available for a while and presumably even longer until they come in at a reasonable cost?

I think you will wait longer than that on Oil personally. Oil and Gas will remain higher than normal for a prolonged period in my opinion. How does solar help me heat my home (I don't want a Heat Pump as it means lots of expense and inconvenience) - I am assuming you are talking about electricity production - but how much oil do we use to produce electricity in the UK? As for an electric car - maybe one day. I am a prime candidate living close to London, enough cash to buy one but they simply don't work for me. We regularly do a 280 one way trip with 2 young children - we sometimes don't stop at all, other than to swap drivers. There are few electric cars that could do that on a single charge on a cold rainy day with air con, wipers on etc. If there is it costs circa £100k compared to the BMW I currently drive. Oil will be around for a good while. Most people have £10k-£20k to spend on a car (average salary about £26k) not £100k. I know someone well who works in a Senior Environmental role - the minute they could they got rid of their electric vehicle and purchased a diesel having experienced a 9 hour journey that took 18 hours to complete. Agree the current price is unsustainable long run - long run isn't a couple of months, it's a year or more in my view. I bought some oil to hedge my Energy expense, if oil / gas goes up the shares I have purchased do the same. Hence other than feeling sorry for others predicament, financially I am roughly breakeven. Tight supply in battery materials will also impact electric take up as the cost spirals. Given your energy costs must have increased, shorting oil sounds like doubling up!

I agree - anyone requiring funding should be on much stricter terms - some likely won't get funded. That impacts valuations across the board - or it should do in reality if we are marking to market on a regular basis. It was noted that we had taken the upwards credit for Aiven and Thoughtmachine - i.e. it had been anticipated - so presumably we should be doing the same on those investments that have declined in value but not had a funding round / recent confirmation of that value. I have to agree I would not want to be heavy in this at the moment. I will be waiting on the sidelines for the moment.

Sub £5 as I write. Not sure where we will end up next week. At best a small increase in my view. People want to see some real commentary on valuations - i.e. if we really haven't been impacted then lets state very clearly why. I think the discount is worse here to a lot of similar vehicles as people know valuations are impacted - it's obvious. There has however been no recognition of this at present at an overall level - just we know lots has gone down but the other stuff is doing really well - honestly. Problem is the stuff that is doing well is all of the more difficult to value privately held investments. There is an awful lot of subjectivity in these valuations and different views can result in very different valuations. That's why we are at a big discount. I would prefer to see a year or two of small declines, rather than a big shock 40% decline in NAV when the valuations are subject to another round or IPO etc.

The fact that lorry drivers are being paid more to drive Allplants frozen vegan meals out to depots doesn't mean the frozen vegan food sector is in rude health it means salaries are increasing for lorry drivers (as they have over the last couple of years). It doesn't even mean haulage is in rude health as they have higher salaries and increased fuel costs - the lorry drivers (or specific technology experts) are however doing much better personally.

It's not though. It's not just this sector that requires the skillsets. We are not a technology company, we are a Financial Services organisation - we need lots of the same skillsets, architects, engineers, programmers, analysts, security, cloud etc. The skillsets are much broader than the tech industry. It doesn't infer that our sector - early/mid stage technology is healthy. Sainsburys, BP etc all require these skillsets as they do things like move to the Cloud from physical infrastructure, build new online capability, connect monitors, upgrade infrastructure, systems etc. Companies already making a profit are also in a much better position to pay the salaries requested as a general rule.

Salaries of technology staff has also run up to a lot more than 10% as well. That's the tip of the iceberg for certain skillsets.

Yes but given most of the companies in the portfolio won't yet be profitable (gross profit isn't profit) it means we will be spending more than we gain from any revenue increases. Most of these companies are not net profitable / cashflow positive. They are still investing in staff / premises / product. What you say is of course true if net profitable. In all likelihood serious inflation in a start up is likely to result in bigger losses as they fail to pass on the price increases as quickly as the cost increases come through. They don't have long term stable to scale workforces / production etc, so it's new investment and the inflation changes the business plans and cashflow forecasts rapidly. This is on top of a virtually inevitable recession - as Cazoo is finding out. Not sure if it's a Cazoo problem or a that market - another similar company went busy recently and Carvana isn't in a great place. There will be lots of companies who didn't incorporate 10% inflation into their business plans. A lot will need funding sooner than the previously thought as a result.

Just saw the announcement on Cazoo - looking to cut 750 jobs in bid to save £200m. As a result management's expectations for the full year are more cautious - that's not going to do wonders for the Cazoo share price. I'm not convinced Cazoo will be around in 2-3 years. This is supposed to be a period of rapid profitable growth for Cazoo - so far it hasn't been profitable and it looks like it's about to slow considerably.

It won't take much of a pullback in the US to put this sub £5 at present. How do you know that we have avoided 'froth'? Regardless of whether we have avoided the worst of it (we won't have avoided it all either), we have also been punished by it. Most of the listed component of our portfolio has suffered significant declines in value. Things like Revolut are obviously not worth what they were last valued at, despite the fact this is unlikely to be reflected in its entirety in the NAV - privately held investments often take months if not years to catch up to movements in valuation - worse in some ways as it comes as more of a shock. A few examples of some of the upstream investments at historically non frothy multiples would help me to understand where you are coming from on that ?

They aren't misleading though. That is the NAV at that point in time. An NAV cannot predict the future - the market however will make an attempt to do so through discount or premium to the NAV. It could take a long while for decreases in NAV to surface in the private market. It only really becomes unavoidable when future funding rounds / IPOs happen or don't happen. It can be avoided for a while. My view - why not be prudent upfront rather than selling the story that we are just different (even though we have a really broad portfolio). I would like to see more detail on the portfolio valuations / multiples. Without that I won't be investing back up to where I was.

The problem is that no one actually believes the NAV that has been communicated is still relevant or current - or certainly no one believes that the broad investment portfolio Grow have will avoid the across the board decline in valuations in this particular space in the market. I don't either. Most of the investments Grow have are not unique to Grow - there are a number of other VC investors and major corporations etc. Some will avoid the decline in valuations - the special ones if you like. A significant proportion won't and some will fail completely - that's the model.

Elon Musk was making the point that too much money has been chasing too few good ideas. An overabundance of credit for which we can blame incontinent money creation by central banks. Notes this has had two consequences - when money has no value people will do stupid things with it. They will either buy assets they shouldn't or they may massively overpay for things - that to me looks like Revolut at 100 times revenue etc. Nut valuation. Investments in frozen vegan food - again not a great idea in my view and loads of competition from established companies that are already profitable in this area. Article (Telegraph) also goes on to note that in the last two decades the word 'tech' itself became devalued. It hasn't referred to technology or a technology company for quite some time. As recently as the 19990s it was easy to identify what a tech startup was. Also talks about Softbank and Klarna racing to an IPO as its valuation crumbles. Klarna was valued at $45.6bn a year ago, but recent reports said new funding plans would cut that valuation to about $30bn - i.e. down by a third! Talks about food delivery companies. The article also references Sequoia Capital which have issued a gloomy 52 page propectus for its startups with name reminiscent of those nuclear fallout advice pamphlets from the cold war - like Protect and Survive. In Adapting to Endure it warns 'we do not believe that this is going to be another steep correction followed by an equally swift V-shaped recovery like we saw at the outset of the pandemic'.

Yes I believe we do have some money in drones - Manna...

Surely more local smaller depots, delivery on electric bikes to more localised areas, multiple parcels at a time? Will be interesting to see how the drones do.