focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
UI Path a more nuanced history. last round fundraising feb 2021 (pre bubble) gave it a company valuation of 35bn. Also gave UI path a 100m value in our portfolio march 31 2021 (pe bubble). However we disposed of 49.8m by next results leaving a 50m on our books so our valuation of UI path was not marked up during the bubble at all. Conservative.
Today UI Path has a value of 10bn and is well off it’s 52 week low of 10.4 and is trading at 17.2. Trust Pilot also well off 52 week lows (62) vs 105 today. Given we recycled money upstream -where valuations never were in a bubble- we should also be well off 52 week lows.
Looking forward to remortgage. Hope these SP prices hold long enough for me to top up. Fear our half yearly preliminary results will boost SP maybe suddenly -although never has in past.
We will go up. Impossible to say when or what pattern. Probably swift when it starts. THe 2 year drift down at some point soon will be a 2 year climb back up. I suspect back to 11.82 within 2 years and then beyond. There has been no dilution since we had 11.82 and the underlying portfolio will be 4 years more mature pus all the reinvestment upstream we did on 2021 and 2022 profits.
10 years is a good life cycle on average of a start up with seed to later round or IPO exit. Some take longer but some faster.
4 years of steady sales and product development growth is 40% of the life cycle. Portfolio has almost no firms in obvious trouble. All growing sales at a great clip.
Https://pitchbook.com/news/articles/VC-performance-IRR-down-double-digits
Thought machine our largest holding by value, over 109m. It was one of the few with a NAV increase on our finals. Could easily confirm a price discovery well above what we have on our books for. Late round IPO does not matter. Even talk of an IPO nice to hear.
7% is not only the spot rate from 1971 is is the average rates over the last 52 year period. . SO 5.5% no big deal.
For my money I think this is a spike that will not last and this has massive effects on what asset class will perform best over the next 20 years. I think we have a “ Japanization” of the UK economy and that means quite low interest rates and sluggish growth. Enormous forces are there to keep interest rates at 2 or 3% not the lest government debt servicing costs. They will bring them down to that range at the first opportunity. Even QE will be used now regularly every recession we get. BOE brave to be doing QE right now but not sustainable . Just for show that they can and will do that. Will never QT away all the QE. Just too much money involved.
I suspect incoming Labour government can cut an anti inflationary deal with BOE to put QE that we have outstanding and any new QE into long term infrastructure and endowment s of Universities and the like. Even endowing pension pots. Endowment is anti inflationary (as opposed to current spending) and thus financially stabilizing. Sunak team just firefighting now until the election and not expecting any new thinking from them.
QE and ultra low interest rates over a long period of time was a game changer. Nobody knew it could be done without Weimar republic massive inflation resulting. Now they know they can do it -too tempting a tool to leave in the shed.
We have never been lower in our history as a publicly traded trust.
OUr first results (half yearly 2016) stated a NAV/share of 3.52. We are now 7.80/share with discounts applied to reflect current market conditions rather than wholly rely on last round valuations. For me conservative enough,
Portfolio vastly stronger than in 2016. No core company about to go under and yet some churn is quite normal in the sector. Well chosen core portfolio and some great seed companies coming up the pipe.
The SP overcompensates for uncertainty regarding interest rates that are high but hardly catastrophic historically. About 1 or 2% above recent long term norms. Average rates over a longer period of time, say between 1971 and 2023, were 7.11 (higher than today). The peak was 17% in November 1979 and yes 17% rates would drain most long term investments of movable capital but only for a short while. Private equity markets did not collapse in 1979 as you would expected given the noise today over 5.5% interest rates.
What we have today different from 1979 is retail investors able to go in and out of private tech equity markets. While this has created liquidity it has added much volatility. Volatility is a 2 edged sword. Go down quickly and irrationally far but can recover fast as well.
For my money I am holding on and hoping for fresh money to top up at this SP.
Thanks for sharing. Sadly I am 100% into GROW and since we are at our 9 year low I can’t possibly be neutral. My average buy in price is circa 580. Ouch.
I’ll diversify a bit when we hit 11.82 again -whenever that is. Still confident these will rocket just can ‘t know when. US budget fights a dark cloud for October so maybe November on our half yearly results. Oil at 90 weighing on shares a bit due to impact on inflation. .
However we don’t go down with a recession as our portfolio generally not selling into today’s market but tomorrow's. We have been going down on interest rate rises. A recession pulls them down. So perversely a recession probly wil make us rise.
For my money we are oversold and by some margin. A lack of recent price discovery by IPO and late rounds menas we are considered a bit of a black box. Enough investors do not trust our NAV estimates. I do turst them so tremendous upside -once the funding round market reappears and thus price discovery on a good % of our core portfolio. Wiht that discovery I expect our curent NAV is conservative not overstated.
Could be that as we drop out of FTSE 250 we lose investors who held us for no other reason than we were part of that F250 basket but it is too early to buy for those investors who want the tax advantages of AIM. So forced net selling on the transition.
Thanks for sharing.
I’m an economist so qualified and successful only at longer term investment strategies. GROW ticks all the boxes an economist might have for long term (10 years plus) above benchmark returns but I never saw this dip coming so limits to my approach (if one needs to access funds or one wishes to play the inevitable dips and volatility by switching in and out).
My long term trend advise is:
1) the sector GROW is in if not 100% GROW. Especially from this base should significantly outperform all reasonable comparables with similar downside risk.
2) Anything AI assisted healthcare. Some future potential priced in but still massive upside left.
3) short oil. It will come down from these levels. Don’t know when but months not years. Long term sustainable price of oil must be below the cost of switching to green energy alternatives for the same BTU values. Currently levelized price of solar in some parts of world 4.2c/kwh which is equal to 65 dollars a barrel. Also shale oil and gas kicks in above 40 dollars a barrel so nothing saudi can do about that.
4) AI architecture, software and service industry. A lot priced in but still the future. GROW holding s of AI related firms do not have high valuations which is part of my reason to hold GROW. Entry at a good price.
5) internet based banking which is another reason I like the GROW portfolio. Hard to say which firms will prevail but a lucrative growing market. Good odds for any well run firm in the sector.
6) pre seed and seed for EU/UK tech firms. Valuations less than USA but same potential. Sector should be recession proof as long term by nature. Another reason I like GRWO portfolio. 1,700 start ups professionally chosen.
7) Manufacturing firms that really are tech firms but valued at manufacturing multiples. Step forward Rolls Royce.
Https://files.pitchbook.com/website/files/pdf/Q3_2023_PitchBook_Analyst_Note_Introducing_the_Pre-Seed_Dataset.pdf
2023 will end above 2018 and 9 continuing an uptrend that spiked a bit 2021 2022 but not excessively so.
Did not mean to say 3% (or lower) within 12 months just falling in that direction.
24 months yes i would predict that. many forces combine to create a new normal of rates in the 2 to 3 % range. japanization of rates in the long run for all western economies with usa canada etc last due to growing workforces
Https://www.cnbc.com/2016/06/15/want-to-get-into-tech-investing-vc-firm-draper-esprit-has-just-gone-public.html
nav/share September 2916 results 352 and that was a choppy market due to brexit (brexit vote on week after launch)
yes there are interest rate headwinds we did not have plus ukraine but nothing on the scale needed to justify the discount to nav/share we have had for over a year. it cant last.
ate ee really worth less than at our launch when we were a much smaller company measured by any metric one might chose. basics of portfolio companies same as in 2916 to march 2020 period in terms of average sales growth and portfolio failure rates. nothing fundamental has changed.
within a year interest rates will be coming down again likely to a new normal below3%
but do peak interest rates of 5.5% or so really change the fundamentals of risk free return on capital to justify our discount to hard won nav/share . it will correct and probably quite rapidly when it starts.
https://investors.moltenventures.com/storage/uploads/PLC/Results-and-Reports/30.09.16_Interim_Results_Presentation_September_2016_bjgyd.pdf
nav 122m
It is pretty clear the dip in valuations for private tech is over. They are not in free fall (as they would need to be to justify our sp discount to NAV/share) and in fact have stabilized at current levels.
SO if you believe GROW have accurately valued the component companies taking properly into account current multiples and comparables (which they say they have done and I believe them) then givne organic sales growth our NAV/share shoudl rise from here without any change in valuation multiples.
When will we start to catch up to our own NAV/share is unknown. I suspect sooner rather than later but each of us wil tk our own position on that. 2.42 silly.
Great articles.
Oakbloke is more or less my position on this. . I thrust we are both evidence based analysists rather than dreamers. . Time will tell. I have pencilled in recovery to 12 quid in 18 months or less. That is a long way from 2.60.
Graphcore has challenges to be sure but right sector to be in and lots of intellectual property and talented staff who will find a way. Is it really only worth 1/1000 of NVIDIA? There will be a nich that Graphcore will profitably fill even if it never takes on Nivida head on. Of course if it can challenge Nivida head on (as it seems to be saying it will be able to do in due course) sky’s the limit.