Member Info for ShearClass

The more I watch the market the more I’m convinced that hedge funds & PE often work together to control price action. MW are doing someone a favour IMO & that favour will be repaid in the future via some sort of tip off/ juicy gossip on a different company.

If someone bids £2 for THG then they will be down £25m on tonight’s close. Small fry for a hedgie that declared a 0.6% short position against NatWest yesterday, worth ~£160m & which benefited by around £6m from todays banking chaos. I think it’s a good sign that they are involved in the games here.

The interest income comes from their ability to pool client balances held in their alternative banking arm into a single overnight balance and then earn interest on it.

As per below extract from the results this balance averaged £1.6b YTD and will likely continue to grow as more accounts get added;

"So far this year, the blended average balances has been £1.6bn and the blended average interest rate has been 2.8%. As disclosed in the accounts, we have also hedged some of this interest income through interest rate swaps (see notes 10 & 15)."

If interest rates are sustained at the 3-5% level for the next few years & pooled client balances double or triple then you can see how beneficial a tailwind this could be...

Re. buying on news, agree it will be very difficult & based on last week's behaviour the MM's will be reliant on sellers determining where supply lies / how high the price goes.

I note yesterday's buyers appear to have exited this morning, shame we couldn't get through technical resistance at 245p (where it traded post IPO & the peak last week, also provided support on the way down last summer). Just a matter of time though.

I'm taking a 1 year view of where this will be trading post the Cali rollout commencing in Jan 24, not interested in selling before that unless the share price re-rates to the £7-10 range (£200-300m cap) that I believe represents fair value given the scale of the opportunity / need.

Re. free float, as per Simply Wall Street data (why I assume is taken from filings / bloomberg), the top 20 shareholders own 91.2% of the shares, of which management own 42.3%. This could be even higher given that Premier Miton are down as holding 890k but are at 1.62m on the Kooth website. So that leaves a public float of <3m shares if none of the top 20 want to sell.

@Golfnut, they also have a further £205m hedged;

" The interest rate swap contracts designated as hedging instruments relate to transactions entered into in December 2022 to fix the rate of interest receivable on cash balances held by the Group in respect of its own free cash balances as well as client cash balances. With the interest rate swap, the Group receives a fixed rate of interest and pays a floating interest rate based on SONIA, the difference between the rates results in the Group receiving a fixed rate of interest.
The contracts commence in June 2023 with expiries in June 2025 and June 2026, with an average net interest rate receivable of 4.1%.

Upon expiry of the contracts or if they no longer qualify for hedge accounting, the deferred gains/losses in comprehensive income relating to the Group’s own free cash balances will be reclassified within finance income and those relating to client cash balances will be reclassified within other operating income. The hedging ratio at year end was 1:1. The hedge effectiveness will be reassessed at each reporting date."

So in total they have hedged ~£532m at an average net interest rate of ~4.13% which will pay interest out for between 2 to 3 years...

That leaves ~ £1.1b unhedged & presumably benefitting from the further 0.25% interest rate increases from the BOE & FED.

Not bad as a secondary revenue stream!

I suspect the size of the incoming contract will take almost everyone by surprise. It’s a tremendous endorsement & will surely lead to further deals with other US states, health providers & internationally via licensing out the software.

The 20 years of groundwork they've put in with the NHS gives them a huge competitive advantage which until very recently had been ignored by the market. Not for much longer IMO.

Good spot on the holdings changes. This company should be issuing RNS's for both the Amati & Franklin Templeton increases, the fact they aren't suggests they don't know AIM rules or are deliberately ignoring them.

Here are the previous holdings;

https://web.archive.org/web/20221130142524/https://www.tinybuildinvestors.com/key-shareholders

As per Amati's last interim financial statements to 31/07 they held 4,435,936 shares, so have added just over 2m.

That still leaves the vast majority of trading volume unexplained, Premier Miton owned 9.5m shares at IPO so could have been sitting below the 3% threshold & Makers Fund held 6m post IPO but could have sold at any time. New buyers are likely below the 3% threshold although with this lot you may never know.

Only Berenberg & Numis left on 47p bid then it's down to 45p.

Exactly right rock8, it's about 5 vs 1 on buys vs sells sitting on the book. If the shorts have been rattled by Sparta emerging then it could get very interesting indeed. Declared short interest about 0.5% stood at 3.83% on 15th March, however the reality is that cumulative short exposure including funds sitting below 0.5% is probably at least double that number. Even the 3.83% is equal to 50m shares though, which is more than enough for a proper short squeeze.

@Alas_Smith, the market makers do not drive the price on a SETS order book. It's driven by market participants placing orders on the buy / sell side...

Wow, having periodically checked the order book on THG for over a year now I don't think I've ever seen it look like it does this morning, let's just say the buy side is stacked..

Such a pleasure to read the final results,

My highlights below;

FTSE 250 / Premium Listing

“As a business that is growing in size, becoming more global, and gaining interest from increasingly larger clients, particularly within the institutional space, we believe a Main Market Premium listing will serve to further enhance our reputation and support our market penetration as we move into new countries and engage larger clients. At the same time, Premium Listing reporting standards will naturally lead to higher levels of governance and disclosure, both of which we know will be well-received by our clients, banking partners and investors alike.

The Board and I are now in the process of establishing the relevant workstreams and timelines required to deliver a listing prospectus, with a target timeline of 2024. We are very excited to think that Alpha may shortly be in a position to join the FTSE 250 and will look to update investors again in September, when we publish our interim results statement.”

ABS international expansion;

“Whilst we are only scratching the surface of the European market, the service providers we are partnering with are global, and have already expressed a strong desire for us to expand our offering to North America and Asia. These regions are currently outside of our regulatory scope, but with the benefit of the interest tailwind, we have taken the opportunity to begin regulatory applications in the US and Singapore. These applications are just one such example of our accelerated investment in scalability that is being carried out to secure our global expansion. Providing these applications are accepted, this will open up new revenue opportunities for the business, from existing partners who have already shown a strong appetite to work with us in these jurisdictions.”

Interest income;

“So far this year, the blended average balances has been £1.6bn and the blended average interest rate has been 2.8%. As disclosed in the accounts, we have also hedged some of this interest income through interest rate swaps (see notes 10 & 15).” - That’s an annual run rate of £44.8m, nearly double Liberum’s January estimate.

Tremendous company.

Yep, looks like a good decision with a 51k sell at 46p. It’s an odd set up, I still think it’s an options overhang which may or may not clear post results when consideration shares are issued…

It's a surprising RNS. I'm not sure why RENX wouldn't have been going for a Class 3 approval anyway - they've done the clinical utility studies & conference call commentary has discussed intense data analysis etc. Plenty of info on reclassifications & different device classes available online...

You don’t necessarily need revenue to improve sentiment, any of the following would help;

- Meaningful partnerships that increases the likelihood of future sales being recognised

- Regulatory progress around reimbursement in the US (they has been nothing since FDA)

- Product development progress (since FDA this has retrenched)

It’s hard to imagine a company performing in a worse manner post a supposed inflection point. For some inexplicable reasons PI’s are still buying, I suspect this will continue to fall as the apparent incompetence of those in charge is more suited to a £5-10m market cap than a £56m cap. I.e. the options issued last week were another huge own goal, following the horrific RNS in January and the ‘we don’t want short term shareholders’ interview last summer when shares sat at 135p.

That is interesting re. Deliveroo. I actually think we'll see quite a few tech IPO's in the second half regardless of macro conditions. They'll have no choice if they can't raise privately and many VC's will be extremely reluctant to participate in a private 'down round' as it has many negative implications. Suspect GROW will be drawn towards the 240p level if it closes below 300p...

Absolute jokers, the UK market is utterly laughable.

Very interesting news yesterday, as usual for AIM it's already been forgotten with the price starting to drift back on low volume (market makers being ultra risk averse as always). Once the value of the deal is confirmed then I think more PI's will take notice!

Here is an interesting interview from a few months ago;

https://www.youtube.com/watch?app=desktop&v=BJxOQOaijNs

5 year plan mentions the word 'unicorn'

After yesterday the chances of that happening have to have increased a fair bit.

Good post by sharenicelynow. I simply think the share price rise since November (290 to 800p peak) meant this got way ahead of itself. It’s a volatile business & bad debt is very material vs gross profit. I can’t see why it would ever trade at >15 current year PE? No chance anyone would bid more than that. Centrica had a stunning year & trades at 5.5x 23 PE…

The rise has been driven by PI sentiment and is now unwinding, I suspect this will be sub 400p in a couple of weeks as people continue to take profits / losses.

Yep, it confirms that everything is as it should be. Positive to see no use of the £60m RCF & £30m in cash. Feels like a decent swing trade now down here, especially given the bounce in US tech & huge fall in yields. CPI print this afternoon is critical for a recovery back to the prior trading range of 350-400p IMO.

So basic EPS only grew to 29p from 27p in 2021 and diluted EPS was flat at 26p. The £21m of impairment costs have essentially wiped out nearly half gross profit. I can’t see any reason for this trading at a PE of 27x given the low margins & obvious risk of further growth in bad debt going forward. IMO it’s been pumped by SCSW & is significantly overvalued.

The only nonsense is coming from rampers who've impaled themselves on a falling knife. There is no 'great entry price' for a company like this in the current environment. They burned £11m cash in the last 6 months and reckon they can last indefinitely on the £11m they have left... pull the other one. IP has very little value if the company doesn't have the cash to commercialise it.