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With the material recently published I think SMTs private valuations is fair. On Stripe we know recent round (March 23) was down 50%. SMT marked down the B share 53%, the G Pref 53% and the H Pref 31% and obviously kept the I at £70M. The discount on this should not be about whether SMT is valuing things properly, they clearly are, and updating 100% for down rounds. You can argue that the people putting in $6.5bn dont know what they are doing, thats a different argument but following the money SMTs valuation process is 100% robust based on my review of Stripe which is their 6th biggest private investment and on which we do have a recent material funding round. $6.5bn isnt beer money so hard for the back seat drivers to argue with people putting their money where their mouth is.
Historically USA has outperformed SMT from launch to end Jan 2021 by a good 10% p.a. but since then fallen more than SMT by 7% p.a. So in the good times USA has better record but in the down markets SMT more defensive or at least that's the history. Interestingly, as a % of top 10, USA has more privates but less concentrated in terms of the top 10. Noticeable difference is USA's punt on Spaces, much bigger than SMT, almost double relatively speaking. Conversely SMT much bigger punt on Moderna, what is the better bet?
The reason discount exists is the Private valuations. i did some calcs on Stripe at post money recent valuation of $56.5bn. I think SMT own 0.25% by my calcs but they carry it as at 31.3.23 at £201M rather than my calculated £114M, a 76% premium. This isnt as bad as it sounds as my valuation is based on ordinaries and they hold Class B ordinaries and G,H and I Prefs so you have to distribute equity value across these different securities as their ranking is different in the waterfall BUT I think 76% a bit excessive in the aggregate but is is IMPOSSIBLE to be certain without more info from SMT. I have asked them to consider supplying it, lets see what happens. They should because its a free option as market is not differentiating.
But thats where it is trading: SMT share price =628.5
Cum Nav=752.9 (i have left FV of fixed rate debt out as this declines over time. Nav as at 4/5/23)
Discount = 16.54%.
Used Sciehallion discount of -23% from AIC website. Remember to account for cable moves.
So there is no arb
SMTs most recent Factsheet (31/3/23) at 844.88. They give 4 on their RNS releases NONE of which agree with 844.88. Be careful where you start, rubbish in, rubbish out comes to mind.
The more important question: while I understand the 4 different ways to calculate Nav as per the RNS, what I dont understand is why none of those numbers are the FactSheet number? BG has a lot of resources for sure but it would be helpful if the left hand knew what the right was doing.
That is not quite correct. Moderna is one of SMTs largest holdings at over £1bn and believe it or not that is less than 3 days average daily volume actually traded. So to exit this position gently would be very easy over a quarter or 63 trading days. On the private co. valuation, any professional valuation will include an illiquidity discount of at least 20-25% from public peers. Obviou8sly this doesn't cover a scenario where everything has to be sold tomorrow but that would never be the way in any scenario the underlying assets would be exited in practise.
That is not quite correct. Moderna is one of SMTs largest holdings at over £1bn and believe it or not that is less than 3 days average daily volume actually traded. So to exit this position gently would be very easy over a quarter or 63 trading days. On the private co. valuation, any professional valuation will include an illiquidity discount of at least 20-25% from public peers. Obviou8sly this doesn't cover a scenario where everything has to be sold tomorrow but that would never be the way in any scenario the underlying assets would be exited in practise. So the house sale analogy is just not accurate. There is a difference between a Retail realisation(house in your example done by amateurs) and the way a professional would exit a position or value a private position.
That is not quite correct. Moderna is one of SMTs largest holdings at over £1bn and believe it or not that is less than 3 days average daily volume actually traded. So to exit this position gently would be very easy over a quarter or 63 trading days. On the private co. valuation, any professional valuation will include an illiquidity discount of at least 20-25% from public peers. Obviou8sly this doesn't cover a scenario where everything has to be sold tomorrow but that would never be the way in any scenario the underlying assets would be exited in practise. So the house sale analogy is just not accurate. There is a difference between a Retail realisation(house in your example done by amateurs) and the way a professional would exit a position or value a private position.
I referred to everything outside the largest listed companies as private, this was loose labelling. WhaT i should have said was the 48% was the balance of listed, private and funds. I know SMT have their values but I doubt they value the private stuff every day, my guess is they do it once a quarter for the big ones at least. What the calcs below tell you is how the market is valuing everything outside the top 20 listed as that is only thing there can be debate on. The value of the top 20 is easy for everyone to see. At the current price the market has a 65% discount on these investments, saying they are 35% of the Sept 2022 value. The market isnt appreciating the defensive qualities of the Pref share investments which with a few exceptions is how they invest in the privates which had an aggregate £4.4bn valuation as at Sept 22. The calcs give you a pure view of what market thinks not starting at SMTs BV and going from there imo
Between the interim report in Sept and end March 23 (last factsheet) SMT price is down 30.92%. In the same period the 20 largest listed stocks owned are up 10.49% using the weights of Sept 30th. They reprersent 52% of SMT. If the SP fall is correct this implies that the private cos valuation (48% of portfolio) is down 75.78%. Most of SMTs private investments are large companies and the investment is held as a Pref share which means they dont fall as much as ordinaries. Over the same period the Nasdaq was up 15.44%. The market has gone too far even taking account of the 50% valuation fall in Stripe. The fact SMT hold prefs in Stripe means their fall won't be as high. SMTs valuation mark down was 26% on Stripe from Sept to March. That is right given they are in Prefs and fact they I am sure had a valuation cushion from fact most of their inverstment was done in the G round of 2019 when the pre-money valuation was $35bn, not $95bn or even $50bn . The market has run ahead of itself too far on this name. JPM has a value of >$400bn, Stripe at $56bn looks good value to me at 6x the money raised.
so what if its a year away, nothing will happen for 5-6 months and it still leaves the prospect of a £100M raise. Who in their right mind is going to drive the sp up with this coming for a co worth £38M and 2 FCA investigations ongoing. This is like a dingy becalmed in the Atlantic and will go nowhere, up down, up down going nowhere.
This sp will go nowhere but down as market is thinking its a £100M raise at minimum given what they said. Their ambition needs to be reigned in because you are right the current shareholder base cant provide that sort of funding so the result will be you will loose your shareholding if you cant follow your money. Given a current market cap of £38M and a £100M raise that would mean shareholders putting in 2.6x the value of their current holding to avoid dilution. So if you had £1m invested you would have to re-invest another £2.6m. This is clearly nonsense for existing retail shareholders and hence the importance of the message to management to scale back their ambition with the first funding. Its so onerous to existing shareholders its a joke. Its like the joke on Amigo is insolvent. Amigo looks insolvent because they have hit reserves with a £344M claims provision to leave a net -£117M equity. Out of this £344m they said the numbers include an expectation of using £270m in cash. In SOA1 they offered £15M upfront and some further odds and sods. No wonder they were kicked up the backside and told to go and get serious. They were taking the **** and got exposed as chancers or incompetent I dont know which. I think incompetent as GJ seems like a straight shooter but financially he is way out of his depth. Now its time for shareholders to give them a reality check and threaten them with litigation if they go ahead at £100M
They said they will raise £300M (debt and equity). We know they have £100m debt already available(the unused downsized securitisation facility. So I am assuming new debt of £100M and new equity £100M. They were asked how much the equity raise would be but declined to answer but this is a fair guestimat and it makes sense. A lending book with a 49% APR , the new business will be lower, lets say 30% but in any event that can support a 2:1 debt equity ratio.
Not a hope in hell. At your numbers would imply an Amigo valuation of £404m to £566M after Rights Issue assuming they raise £100M. Not a hope in hell. If you don't want to be wiped out, the best strategy is for Amigo to raise money incrementally rather than in one go at depressed prices. They should only raise £50m equity to start and live with that plus the £100M unused securitisation facility. That gives them £150M lending power. At 49% APR generates gross profit of £73M, opex £26M leaves operating profit of £47M-£50M plus say a one third amortisation of the £150M gives new lending year 2 of circa another £100M and on it goes. Raising £100M now is stupid and means you will end up with 27% of company if the RI price is 8p. If its 5p you own 19% from 100% now. If they curtail RI in first instance to 350M you own 43% at 8p and 32% at 5p. If they told the market this was the strategy this alone would lift the share price and the calcs above would be even better. They are total morons raising £100M upfront.
In the accounts mgmt have assumed £270M of the claims provision will be made in cash, p.15 of the accounts. If they end up paying cash of say £75M (5x higher than the original £15M in SOA1), what happens to the £195M? It was taken from reserves on basis Amigo would need to pay £270M in cash but ended up paying say £75M. The £190M should be written back to the P&L, that's, 41p a share. I cant wait for the bull...t this mgmt will come up with to justify this doesnt happen if they settle on £75M cash. So sp should go to 41p if the cash component is £75M, 36p if its £100M etc and that's before you give new business and remaining existing book any value. For now it will stay at a discount until we know the cash component and the outcome of votes. We should have been told the cash part today but instead got a rubbish answer.