Member Info for sageoflondon

The problem I have here is that a number of the companies high in our NAV list I don't believe in. Graphcore could easily go to zero - Sequoia has already written off per The Times. I believe Revolut is in for a considerable mark down at some point. Both of those companies make up a considerable portion of our NAV. Aiven and Coachhub look vulnerable to the same fate at some point as well. That's why I am negative. The smaller companies I have no visibility over, other than assuming it's a representative portfolio so will perform in line with that. There are some others that look likely to hold etc, but I don't think it is realistic to assume that they will support maintenance or even an increase in NAV given the likely detractors. My view obviously.

It might be possible to suppress the share price of say a £10-£20m market cap stock - not something of this size, not in the amounts a PI has to spend as a general rule - sure if it's fund managers talking yes. I have never shorted anything - the closest I get is not holding something, or selling it. Shorting a mugs game unless it's a dead cert. The time to short (if at all) is when the market is flying high. Could have made an awful lot of money shorting Cazoo, WanDisco etc. Not for me. I don't short, don't use leverage etc.

I believe Revolut will also be in for a large valuation haircut at some point. Completely unproven in terms of how it will justify the current valuation. Likely worth only a fraction of what it is included in the books at. Sequoia backed Apple and Google in the early years - considered heavyweight and no fools. Graphcore has no revenue to speak up - just a cash burner at present.

Not sure how accurate - but Sequoia Capital has written down the value of Graphcore to zero - that was reported in the times around 3 or 4 days ago........that will be quite a write off here....around 4% if it is required.

SIPP is capped at £200 per year for shares, ETFS, Investment trusts etc.

Correct. I only hold those - no unit trusts etc. Most are direct equities etc. Funds charge you regardless though - unit trusts and HL get discounted fees, but shave some for themselves etc. I had made an assumption that as we were talking about L&G that was what we were discussing, understand your angle. Even so, with a large portfolio tax can take a big bite.

I don't understand that. HL ISA fees are capped at £45 a year? So say
5 years of a couples ISA at £20k invested in L&G at say 8% - that's £8k per annum ? Could you expand? Dividend allowance going forward £1k. So that's £7k at marginal tax rate, or £45 a year to hold that along with anything else???? Doesn't add up. ISA at £45 per annum dirt cheap, even a SIPP capped at £200 cheap and HL are expensive compared to AJ Bell......I'm an accountant and can't work out how you pay such a low tax rate - would you be happy to enlighten me?

But why not access that in a tax efficient way - if the government is giving a tax relief (acknowledging the level of risk involved in investing in companies at that stage of development) why don't access that in that way...

That end of the pipeline has a very different risk / return profile even when aggregated across multiple recipients. It's the black box almost.

Yes but those are the parts of portfolio with a much higher complete failure rate - often failure to commercialise in anyway / not viable etc. It's that part of our portfolio that you could argue doesn't belong in a listed vehicle - why not get tax relief for taking risk in a VCT etc. You take the risk for no tax benefit here.

or alternately make sure you max out all of your ISAs, SIPPs etc. If you are married that's potentially up to £120k you can shield this year, potentially £160k this year. No need for most people to be paying CGT or Income Tax on their share portfolios. Sure some are over those limits, but over say 20-25 years you can shield well in excess of £1-£2m over those platforms if married.

Agree late rounds worse - but hasn't Grow just done a late round at same valuation or more - when it already had very little cash? Those cash exits are no longer cash though, if that were the case things would be very different indeed. I don't think the picture here is anywhere near as rosy as you believe. I think this has the potential for some very large shocks over the next 6-18 months and I don't mean on the upside. Grow itself potentially has to borrow. I certainly wouldn't leverage to buy Grow stock. Sort of doubling up on any leverage Grow has - in an indirect way.

In reality it's not about a published independent valuation - these valuations are very subjective and by their nature subject to large swings depending on the market mood - there isn't a lot in terms of fundamentals to underpin those valuations - i.e. it's not like they have an ROCE of 15%, ROE of 25% , PE of 13 and a divdend of 4.5%. There is a lot of subjectivity.

It won't matter a jot what they manage to get past the auditors or publish. The market won't believe it. Just not credible in the current market in my opinion. As that FT article suggests - still nowhere near enough red ink on the valuations. That to me is more concerning the the actual drop itself - it doesn't stack up to me. Valuations move really viciously when they do move - up and down - Klarna was an example of that. Something like Revolut (not just that one though) can easily do the same - Softbank overly generous with the size of the cheque. It doesn't take much for £200-£400m to be wiped off the NAV at a single sitting.

What would have improved the position here is the build up of a war-chest of capital (given rates were not going to go lower - they couldn't) and valuations looked bubble high as a result of pitch-perfect conditions - i.e. Cazoo listed at $7bn etc. If we had a circa £300-£500m war chest ready to go at lower valuations I think this would be in an incredible position with some of the deals that are likely to be inked over the next couple of years. A lot of companies confirming they don't need to raise for the forseeable future will be begging for a capital injection at a vastly reduced price within the next 6-24 months, probably on significantly advantageous terms for the investor.

I think there will be a lot of money to be made in private tech in the next 5 years, but a lot of that will be made by 'fresh powder' - i.e. those VCs or funds with lots of cash to invest as good companies even struggle to raise capital, that's where the real money will be made. You are going to make a lot more investing in Klarna potentially at $6.7bn than you are at $46bn. In fact the investor at the latter valuation can triple their money or 200% at a $20bn valuation, whilst the investor at the higher figure is down 50%. Unfortunately Grow didn't have much try powder coming out of a significant technology bubble - most was committed. We haven't really invested much at recently depressed, and likely even further depressed valuations coming soon. A lot of dry powder in the US will likely move away from software to energy, hardware and biotech as well, given some of the subsidies on offer in the US.

I'm not sure that is really relevant to Grow and it isn't quite what it seems - the tech rally that is. The bulk of the last quarter equity gains in the big tech space were driven primarily by a very small number of outperformers. Nvidia rose almost 100%, Tesla by about 90%, Facebook also went up circa 70% in the first quarter - those have a massive weighted impact. A significant proportion of the market stayed flat. A lot of those profitable technology P/E ratios (the ones that have earnings!) are likely still high given rates at circa 5%. Investors are going to be looking for valuations that are supported by underlying earnings in this environment - gone are the heady days of values based on fingers in the air multiples of sales etc. Personally - I think the market generally, in the technology space, could well have a way to fall before it approaches anything like value territory.

It's neither a negative or a positive to me overall. The only companies likely to raise are those that can do so at a valuation equivalent to prior valuation, the remainder are likely to try and hold off for as long as possible - some may well have tried and found they could not raise at anywhere close to prior valuation. Ledger looks to be the only material investment in those three to Grow. Of much greater interest are the larger pack of investments Coachhub, Revolut, Aiven, Aircall etc.

I think anyone investing in this has to be fully aware of the considerable risks. Otherwise - don’t invest.

My view - this is much more likely to go to zero in the next 3 years than it is to go back to £10 a share. That price was a post Covid bubble, completely. Just not going to happen. There is considerable risk here given the debt as well. SVB was an eye opener to a risk that no one had really considered, but it certainly isn’t the only one.