Member Info for sageoflondon

I'm not predicting a dire share price for this for years as such. I think all assets of the nature owned by Grow will face substantial headwinds, not Grow specific, but expect Grow to suffer along with anything similar. A lot will undoubtedly go under - that's the whole nature of the model? Some will succeed and an awful lot won't. Now the tide is going out we will get to see who is properly prepared. There was far too much cash chasing very questionable opportunities, I actually have no idea whether Grow has some of those, but have my suspicions there will be a few (at least). A new technology doesn't always succeed etc, that's without pricing in liquidity risk given funding is likely to dry up. Anyone with dry powder will be able to pick over the bones of a number of companies in the future for pence in the pound. It's just the nature of markets. Everyone ploughed on in when technology valuations were at all time highs, there was always going to be a big re-trace.

I wouldn't want any leverage whatsoever at this point in the market cycle. Time to borrow is when are are in crisis - not sure we have reached that stage at all yet. Long way to go. Any pause in interest rates will be nothing to celebrate if it leads to higher inflation. Inflation impacts everyone, higher rates primarily impact those who are over leveraged - that's business. In reality, rates are still on the low side by historical standards. There is a lot of pain ahead.

I am not convinced Revolut has infinite runway - that's a discussion for another day. If (and that's a big if) it gets a UK banking license, compliance costs will go through the roof, with a substantial investment required. Any company can go bankrupt. Sure there may be some assets to recover here if it happened, but ask Patient Capital investors how much they got back. Just saying. This is certainly not a safe haven.

It's a little like Poker......we don't need to raise, we don't need to, capital raise announced at reduced price etc. There will be a lot of those, but only those with strong prospects likely to be successful in my view. We aren't there yet - this has only just started in terms of economy wobbles etc.

You might be right re the odd IPO but pricing will have to be right. It's a tough sell at the moment. Best time was 18 months ago!! I have no idea re share price here. It's gone lower than I expected, but I didn't expect SVB to go bust as such.

It would actually be really helpful to know the types of returns made on some of our disposals - what were the overall ROIs on things like Cazoo, Trustpilot etc. What was our overall return on those investments - I am sure it's there somewhre?

Interesting article in the Daily Telegraph - Silicon Valley Bank's collapse shows going public was right move says Deliveroo boss - basically Will Shu thinks SVBs collapse could create more problems for privately held tech rivals in raising the cash they need to subsidise losses. He is saying that despite the fact his shares have plummeted he has a balance sheet with £1bn on it.

She might currently be on £41k, but that will be replicated across her multiple directorships or thereabouts - and she was the CEO of decent sized corp previously. Those sorts of buys are chicken feed. It has to be more than a token for me before I take notice, a show of real confidence.

I don't personally think Ocado is going to be bought anytime soon. They have had 20 years and cannot generate sustainable profitability commensurate with the size of the business, about the only thing that is much more than commensurate is the CEO's salary. As a customer I like the service, as a potential shareholder I wouldn't touch it. Maybe if it came down another 50% I would take a look - everything has a price. I can't imagine Amazon need Ocado etc. Just a lot of accumulated losses over the years that are unlikely to be recovered.

This isn't about Molten specifically - but Molten invest across the technology spectrum. This won't come down to individual company specifics unless they have a couple of very big successes that they hold post IPO and that goes stratospheric, or a couple of really big failures. This referred to Steph's comment really on sales growth - sales growth is only relevant if it is at a 'proper' profit - not GP. Sales don't always equate to profits as many companies have found. There will be a few in the portfolio where sales never really lead to sustainable profit or a sustainable business.

The Covid crash isn't really relevant to this - tech benefitted significantly from that - this overly so as we ended up with stratospheric 'bubble' type valuations which didn't last and allowed things like Cazoo to achieve a $7bn valuation (that sounds like a joke as it currently stands at about an £80m market cap. Cazoo wasn't the only 'technology' company to end up in that territory. There have been a number of other failures valuation wise, but Cazoo probably the worst. WanDisco disastrous as well - but who pays almost £1bn for £9m of current revenues with the promise of £24m next year. At best it was very very overvalued, as it happened there was fraud - can't predict that really. This isn't about a Covid panic, this is about a permanently higher level of interest rates, less capital availability etc. How did (that's would as it didn't exist) Grow deal with 2008 etc. This will be more akin to that - probably not quite as bad in some ways, but the big caveat is that whilst we have low growth we also have inflation. If rate rises pause it could take us somewhere we really don't want to go. If rates go higher than expected a lot of tech companies won't exist. Sales are virtually irrelevant if you aren't making actual real profits on those sales - not just gross profit on the sale of a widget. Ocado is a great example of that - I promise we'll make a profit, one day, honestly, just keep backing us etc. At some point the money train stops along with confidence in the business itself. Uber has grown sales massively but still can't make a consistent commensurate profit and has grown largely as a result of undercutting the competition. Once they are as expensive or more expensive I'll take a black cab in London. Drivers will also go elsewhere if they aren't paid enough - it would almost be better to be a smaller Uber that actually made a profit if you're a shareholder. Many businesses like that move beyond their natural scale (largely as a result of zero rates) and eventually never achieve the profits sufficient to cover vastly inflated overheads. Is it really cheaper for a robot costing (say £50k, requiring replacement every 5 to 10 years, with servicing, repairs etc.) lots to pick your supermarket order than it is for a minimum wage supermarket employee to pick those goods off of the shelf - you would think someone at Ocado has done those numbers and the answer is hopefully a big yes....

Precisely - it was the pension funds with LDIs that benefitted from that BOE intervention - no L&G balance sheet exposure re that, given their role.

or the market accurately pricing the level of risk associated with investing in these types of companies particularly in an environment where zero rates are behind us, banking stress, lack of IPOs and fresh funding rounds (significantly increases solvency risk globally in the sector). This is the market valuing the entity based on prevailing market conditions. If there is a pause on rates and inflation gets out of control, which is a possibility, then rates will end up an awful lot higher - that's also something to price in and assign a probability to. In all honesty I have only held small amounts of this since selling bulk of portfolio in Dec 2021 / Jan 2022 - missed the 1190p by a long way, but not so sore about that today. The level of risk here is considerable at present, however you look at it. That doesn't mean it won't be a good 10-15 year investment, it won't re re-testing any previous highs for many years though.

Most insurers have not done that - Solvency II wouldn't allow that much leverage in a portfolio supporting policy holders etc. I work in the sector. Some of the pension funds had done something along those lines - LDIs etc.

Yes but it's precisely that problem at a basic level that caused the problems for SVB - they received so much cash from depositers (not people like you or me, but rather large tech companies with millions of VC money) that they had to invest somewhere quickly = government bonds of which capital values were heavily impacted by rate rises recently - more of the deposits withdrawn due to a lack of funding rounds by tech companies and need to meet increasing operating costs, alongside this (and decreased value of treasury bonds etc)led to a need to raise capital which led to a run basically. Then it's game over. Very different profile to a life insurer. If you can hold bonds through to maturity then you get par back anyway etc. So if you have matched effectively should be ok - a lot more complexity than that I know.

Life and pension (bulk annuities customers) don't want their money (and can't have it) like a Silicon Valley tech company with $30m on deposit etc. Different duration matches. That's one of the reasons why L&G do a lot of really illiquid long term stuff - e.g. accommodation builds etc. Of course they will have some bonds.

How can those valuations be accessed? i.e. you are saying there is an open offer for a stake in Revolut at that value? Can I access this material?

I think that NAV is a lot more realistic then it's the discount you apply to that given uncertainty with a portfolio of this type in this prevailing market - it's not going to trade at a premium, rather a significant discount given events like STB etc, subjectivity in valuation etc and due to illiquidity of portfolio. Say 10-30%.

let's wait and see where Revolut is at valuation wise come the next funding round / IPO or sale...

NAV is very judgemental - it's an accounting calculation that is never really current. I don't know the valuation of all companies in the portfolio - I only know the high profile ones and apply my own view to that. I think Revolut is somewhere around $5bn, not $33bn, not even $15bn. I think my valuation is based on a fair bit going right from here onwards etc. I think you underestimate the level of risk inherent in a portfolio like this - in times of stress that will impact price significantly.