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Nothing demonstrates the difficulty of private valuation as well as Aiven, the third largest holding. May 21 post money valuation $800M, Oct 21 $2bn, May 22 $3bn. Grow has it at £83m, my guess is they own circa 5%. So they are valuing it correctly at a discount to last round but the private market was on steroids in late 2021 early 2022 and as you can see from all PE listed valuations, SMT good liquid ex at 60% discount on privates if you assume their large publics deserve no discount, MSFT et all. The public markets just think the private market is way over the top, that is why there is a log jam in the capital recycling. On secondaries its a buyers market not a sellers as everyone knows this. Grow spent £311m in21/22 financial year, the largest amount in their history and realised £126m and yes got a £363m FV movement. They are now paying the price. Because they invest mostly in Pref shares which can have many different terms and because of NDAs cannot reveal all the details (and the detailed terms affect valuation) they and shareholders are fighting with their hands tied behind their backs. The information asymmetry makes these unsuitable public vehicles, its that simple. Also they cant return capital until they get much much bigger, otherwise they get diluted when the companies come back for funding which they do regularly in the A/B and seed stage. They have about £70m cash and undrawn £50M to support a portfolio of £1.3bn, there is no chance of a capital return or dividend and they cant sell at a fair price. This is why the people in the market describe conditions as among the worst ever but they caused it themselves by being too exuberant in 2021 and 2022.
What part of Nav calculation do you think management misunderstand & what do you mean by "underweighting complicated preference shares"? The Pref share has liquidation preference but no voting rights. What are management underweighting?
Weak sterling, strong dollar, plus there are lots of stupid single entities out there, but the market by definition is not stupid.. Another datapoint, the Reddit IPO. Coming this week at valuation of about $5 -$5.5bn. Their last funding round in 2021 was a valuation of $10bn. The magic 50% discount AGAIN and it doesnt get more current than that. In 2021 pre Covid, the private market was valuing things at twice the level the public market wants to pay and you are seeing that play out in Molten and they typically play in cos that are much smaller than Reddit so justifying a 60% discount.
Time and time again, market proves itself as worlds best fundamental analyst. If you take a contra view it needs to be based on hard numbers not wild speculation. Graphore is the next test of Moltens valuation policies if indeed it does find a buyer. Until then nobody has the hard data other than the accounts as at Sept last year.
You cant possibly know that Re Revolut. All we know is they have between 0.001% and 5% and its valued at £55M. You tell me their shareholding and then its easy to work out their valuation but unless you know their shareholding you are speculating. On Graphore, if Molten own the middle of the range they will have a write down of half their valuation. The fair question then is does this aggressive valuation policy apply more generally? thats what market thinks currently and so you 60% plus discount falls to 10-15%. Thats the issue Molten face, plain and simple. Market doesnt believe their current valuations and if they write off £12-13M further, market is proved right.
Last set of accounts available tell us their stake valued at £21.3M not £10M. That stake cost them £24M. We also know they own between 0.1-5%, dont know the precise figure. If they own 5%, the £400m is ok, if they own 2.5% they will have a £12-13M writeoff and if they own 1% they face an 80% write off. Those are the facts based on what is in the half year accounts of Molten.
Minimum 188.3M new shares (not sure what happens to Forward options) and taking last reported Navs and £2.7M costs of placing I get pro-forma Nav at £6.73, less fully diluted. 60% of that is £4, thats 50% upside if it goes to 605 of Nav. If its 40% of Nav thats where it is currently priced. 50% of Nav would be £3.36, that is probably the short term target. 27% or so upside in next few months.
There are many different RSI's. As many as there is historical data. A strong 14d RSI just means the share has been performing over that period. So when someone says what is the evidence on RSI, the first question should be what period RSI are you talking about, not what is the evidence on RSI per say. A stock can look greast over 14 days, like SMT and poor over 63 days or 252 or poor over 3 day RSI. Its like when people talk about volatility as if there is only one. The hard part about technical analysis is picking uyour indicators and adjusting them to market conditions. There is NO one measure, that would be too easy
Warren Buffetts Berkshire has never paid a dividend. Since May 9th 1996 he has produced a 10.35% compounded annual return. His rationale is simple. If shareholders can beat his returns dont give him the money, invest it yourself. He argues why return cash as most wont beat him. If you need cash sell some shares. For most investors, CGT is below the marginal income tax rate so this argument gets even stronger when you look at things after tax. He is theoretically right and has backed his view with performance, that is rare. Pick the best and let them do their thing and ask them not to pay dividends.
It means they can sell their TS below Nav. Not a big deal just reflects reality that they are below Nav. Doesnt affect Nav as such because the Nav reflects the value of shares held in Treasury. If they didnt approve this they would have to offer the TS to shareholders pro-rata or not be able to get cash for them unless sp>Nav. Its a sensible resolution. They bought the shares below Nav and can now sell them below Nav to generate cash
The EMH just says all information is in the price. You might disagree with the price but in my experience the market is the best fundamental analyst that exists. The SPIVA data proves it and has done for over 25 years. Generally when people dismiss the market or say its crazy, more otften than not, the market is way ahead of them in understanding the real situation. On the SMT discount, the market is clearly saying it is not prepared to accept 8-10x Revenue multiples no matter who you are or what your growth is. So if market is implying a 50-60% discount it is clearly saying it wants 4-5x multiples for these cos. That's it, right now market doesnt care they recently funded at 8x, they want 3-5x for the bigger names and the smaller ones forget them. The market is smart, dont listen to it at your peril.
£668M at weighted average discount of 35% to last funding round and perhaps more concerning £462M at weighted average revenue multiple of 8.4x. Those are facts as presented by the AR. 8.4 x Revenue is a hell of a valuation multiple in 2023, I could easily make a case for 4x, that lobs £230M off the valuation and maybe another 15% of the last funding round, call that £100M, Total £320M. Take that off net assets of 1.2bn and you are at £870M divide by 153M shares and you are at £5.89 and apply 20% discount gives you TP of £4.54, 67% from yesterday. BUT maybe market not willing to give 4x Rev multiple and only a 50% discount to last funding. Adjust as you want but MARKET is the smartest fundamental analyst out there, thats why 90% or so of the professionals don't beat it. Crazy it definitely isnt.
We have discussed before a 20% discount on the total is a 65% odd when solely applied to the privates. Molten is trading at a 60% odd discount to Nav, with annual results last week. There is no question that SMTs top 5 privates are much bigger than the much smaller cos that Grow invest in but the 60% plus discount is the same. At least market is consistent.
What MF dont say and should is that SMT hold Northvolt, not at $12bn but $11.4bnbn, SpaceX at $144bn not $137bn and ByteDance at $208bn not $220bn. Those are pretty easy calcs to make based on the 2022 AR. So SMT is essentially valuing their holdings at the last ordinaries valuation while holding Prefs. The defensive quality of Pref holding is not recognised by market and SMT need to do better explaining this, especially to a mostly retail investort base.Without knowing the exact amount of ordinaries and the ranking of the Prefs it is hard for market to value the Prefs and hence the broad brush approach of market. SMT could improve on this understanding if they wanted to. I suspect the reason they dont is because of the NDAs or perhaps it makes little difference. But in any event what is clear is that SMT are valuing at last funding round, for the most part.
What you still dont understand is there is NO FOLLY., they haven't failed on what they control. There is no debate on that. Nobody rationally can say SMT is a failure, it just isn't. I think their focus on growth and transformation is right. I would just like them to be a bit more nuanced. One ex of what I mean is that anyone investing in SMT is inherently running a long cable position. This has worked wonderfully over last decade be will that still be case. Why dont they run rolling cable forwards to hedge this exposure. If I want cable exposure I dont need SMT I can do that separately, so I want SMT to hedge it which they don't. When Tech is out of favour, like all of 2022, why not have a macro tech short to mitigate the 2022 losses. Again they dont even entertain this sort of discussion. The investment world is among the most dynamic of occupations. I am weary of someone taking a 0.3% management fee on nearly £9bn and saying that annual evaluations are irrelevant. Share the pain and we can talk about irrelevance. How much pain can you really feel if you are taking £30m p.a. irrespective of performance. That's what annoys me or worse they have collected £150M before they entertain criticism. Nice gig if you can get it.
You do make stupid comparisons. Management create value, the Nav. What investors (dumb and otherwise) pay for that at anytime is up to them. Mgmt dont affect that and hence they have a valid case to be evaluated on value created, hence they beat their benchmark over 5 years on what THEY CREATED. Why do you think they are paid on Nav. They are not stupid, or living in Thailand. They expect to be paid for what they create and that is way every manager running an investment trust is paid.. What you in your delusional stupid comparisons pay for that is thankfully up to you and they could care less. Shares are fungible, houses are not, ridiculous comparison.
The Nav IS the value of SMT, the clue is in the V. The closing share price only reflects the price arrived at by the closing auction and reflects what that subset consider the VALUE to be worth. Yesterday 2m shares traded all day, call that £14M. Are you saying that minority out of a £9bn market cap decide the value. That is the tail wagging the dog is ever there was a case of such a thing. The Nav has as much right to repr4esent the value of SMT as a tiny minority trading on a particular day. I dont think you understand what a share price is and what it means. 14m out of £9bn market cap is 0.15% and you argue that they decide the value. Nonsense. Share price just reflects buys and sells on a particular day driven by all sorts of motivations, says nothing about value. Your in the wrong game if you think it does.
Not on a Nav basis it doesn't lose to its benchmark! The fact investors, for now, dont believe daily Navs which I think are prudent from work I have done is a different argument. I will never accept that the worlds 5/6th largest economy has a niche stock market. Greece is niche, Ireland, Portugal....but not the UK. In declines, yes but cable trades loads and it is not an issue for any international investor to hedge sterling exposure. I dont buy that everything below US, Euro and Remimbi is niche, sry.