Member Info for steph

Thanks sang

I can’t see problems. Think we will finally show a profit but the size of it is so dependent on the sales multiples norms used which is a lagging indicator of sector health. Pitchbook report a surge in these ratios but are they high enough for long enough to affect the valuation methodology use.

Of course share specific valuations based on some purchase or IPO such as Graphcore or Ravelin will help. I keep looking nervously at euro pound exchange rate compared to September 30th 2024. Even 3 or 4% move in the wrong direction can hurt our NAV/share in pounds substantially.

German election results have resulted in a strengthening of the euro which helps us. 60% of our assets are in Euros but our reporting is in pounds. This currency exchange issue hurt us on the half yearly results but is currently neutral.

GROW only purchased 30,000 of it’s own shares on Friday and we dropped on low volume. Normally 50,000 purchased and even at 50,000 will take months to buy all announced.

Don’t see the benefit of spacing it out so long. I expect shares to jump after year end results so wil be move expensive after around April 28 when preliminary results are announced.

Purchases are always spaced evenly across the day. No trying to time the market.

Stars aligning for a long awaited NAV/share increase.

1) currency moment neutral with Euro pound exchange rate. That exchange rate change wiped out our modest profit last time.

2) Revolut valuation at 45 bn seems to be holding. We have it on our books for 30bn so some uplift on our books may be in order. If Revolut do list at 45bn that will become hard money.

3) Comparables on sales to NAV going up quite sharply. This could have a massive impact on our NAV/share calculations.

4) All realizations at our NAV calculations for that company or higher.

Https://files.pitchbook.com/website/files/pdf/2024_Annual_European_VC_Valuations_Report.pdf

“The Private Intermittent Securities and Capital Exchange System is expected to launch in May as a regulated secondary market for private share trading. It is intended to unlock more investment for fast-growing UK companies, of which the ScaleUp Institute estimates there are around 14,000 with a combined turnover of £372.3bn.

Several firms are set to kick-start venues under Pisces. Interested parties range from the London Stock Exchange Group to private trading specialists looking to expand their platforms.

People familiar with the matter say these include Globacap, JP Jenkins, Asset Match and startup-focused Envestors.

This push into trading in private markets comes at a time when the UK’s public markets have floundered. Last year, there were just 18 new listings in London, which is the worst number since the financial crisis.

Bankers have long argued that there is a secular trend of companies staying private for longer because of the pressures of going public and increased liquidity in private markets.

Goldman Sachs chief executive David Solomon said at a recent conference that private firms should exercise “great caution” when considering going public and that they “get capital privately, at scale”.”

Https://pitchbook.com/news/articles/vc-secondary-discounts-narrow-as-primary-dealmaking-rebounds

Probably buying our own shares helped. Maybe a realization by some we over corrected when we had the disappointment of further NAV/share losses in first half.

Peterrr we have always had about 20% to 30% dogs that never reached the NAV needed to match the money we put in. That percentage seems to be less now even though we have had a big market sector retrace so maybe the stock picking quality has improved since the 2016-2020 period.

No. Unconnected but glad we did not dip with listed tech due to animal spirits.

We are massively undervalued on my reckoning but that is based on other factors.

1) 5 strong broker guidance is for and sp around 580 within 12 months

2) NAV of 660 is solid calculation and will be confirmed at that level or above as late rounds and IPO’s create hard cash valuations after 3 years of estimates.

3) core portfolio has few dogs and is growing sales at 50% or more per annum. Sooner or later this growth will mean NAV growth.

4) our big dip was interest rate related. That interest rate pressure will ease increasing nav of our component companies throughout the pipeline from angel investor to late rounds.

Interesting we went up on a day the American large tech sector went down so dramatically. First time we have been so disconnected from that sector which we normally to some degree track. A good day for tech is normally a good day for us.

We have had quite a bit of confirmation.

I think market confidence so dented only late rounds and IPO’s on 60% of core portfolio will do. 60% is the long term average of price discovery by this means.

Silly SP but that is only my opinion.

How much evidence does the market need to conclude our NAV/share is a solid, even conservative, estimate liable to go up from here as portfolio matures (organic sales growth) and market (unlisted tech) recovers

Exchange rate (pound euro) working in our favor this time with only 6 weeks till end of half. Pound now declined to 118 which is worth about 15 m pounds extra profit on our EU denominated assets. We lost about 30m when the exchange rate went form 1.16 to 1.20 last half.

The retail wrapper should have some more statutory minimum info. actual % ownership of core portfolio key but there are others such as runway length, at the moment the big boys have a lot more info and act on it up and down,

Biggest problem for this share is that we have limited independent information on the companies valuations that make up the portfolio. We are not told what % of the asset GROW owns and thus we can not (by design) figure out what valuation GROW assume for each portfolio company , google that and compare GROW’s assessment t others and news.

It is a problem in the structure of having a retail wrapper around assets that normally are only bought and sold by entities that have al this information (informed consumers) when they buy or sell during funding rounds.

In stable market conditions this lack of transparency did not seem to matter much. The “trust us” approach was sufficient. IN times of market stress, though, the black box trust us approach subtracts value.

In time there will be solid price discovery by future funding rounds or IPO’s. Then the “black box” discount will disappear.

For now if you believe my thesis it is a buying opportunity. The asset is already undervalued by half on the cusp of pretty quick and regular organic growth in NAV/share.

Good luck

It has proven to be a burden to be an economist and not a market analyst. Even if my analysis is spot on it can take time to play out when we all judge our strategies by year to year periods at most.

Anyhow the 5 market analysts following this share give it a target 12 month price double what it is now. They can’t all be stupid.

On top of that is my “long term” economist perspective that the sector is healthy and the valuation dip temporary. GROW has been lousy value for most investors between 2016 launch and now but 8 bad years can be followed by 8 good years if one allows for a long cycle. GROW has not made obvious strategic errors. The portfolio has a below average rate of outright failure. Graphcore was nearly a star and might have been with more government support for UK AI champions. Right sector for sure. Brexit hurt Graphcore as was not seen as EU champion at crucial moment. .

What is missing is more outright successes but perhaps they are in the pipeline about to shout about when volume fundraising is back. For now they are preserving capital and runway length as they must. To still get 50% sales growth projections (70% last year) in a market not stimulated by fund raising is pretty good. Indicates a healthy portfolio.

Excessive fund raising can distort sales growth (Cazoo was overstimulated by easy money they spent unwisely). This period of tough love means the survivors (most of our portfolio) have real business models that are maturing nicely. They can achieve 50% sales growth even without much fund raising.

Some catch up to cyclical norms possible. I’m still all in and am expecting some very good years ahead.

Looking like furhter sales of Revolut hare holding at the 45bn valuation. Even some investors were able to exit at that price.

REvolut is on our books with an implied valuation circa 30bn so some upside there. Pound euro has moved in GROW’s favour a bit so currency movement by march 30 looking to be neutral or better for us. Multiples that guide most of our valuations maybe improving which would, if documented by march 31, have a dramatic impact on our NAV.

Good luck all.

Instead, the big change concerns greater uncertainty in investors’ expectations. This could be pushing up the “term premium”—the extra yield investors charge on long-term government bonds, over and above that attributable to the changes in the central bank’s policy rate that are already expected. The term premium compensates bondholders for the risk that bond prices fall sharply; say, if unexpected inflation forces central banks to aggressively raise rates. Sure enough, increases in the premium on ten-year Treasury yields account for nearly all of the rise in these yields since early December (see chart 2).

It is easy to see why uncertainty has spread. Will Donald Trump deport millions of people? Nobody knows. But if he succeeds inflation could jump as employers lose workers. The story is similar for tariffs, which would also increase prices. At the same time, potential Chinese counter-measures in a trade war, such as a devaluation of the yuan, could prompt a global deflationary shock.

Investors are also unsure about economic growth. The dominant narrative veers from one extreme to the other. Some investors worry about the damaging effects of deglobalisation and a slowing Chinese economy. But there are optimists, too, including those who believe that Mr Trump’s mooted economic-policy reforms, including slashing red tape and cutting taxes on everything from tips to social security, will spur growth. Maybe an ai-powered productivity surge is around the corner. The effect of all these contradictory scenarios is to raise the term premium on government bonds even more.

Fiscal policy is not helping matters. This year g7 governments are expected to run an average budget deficit of 6% of gdp—unusually high considering that unemployment is low and economies are growing well enough. Funding these deficits means issuing fresh bonds. America is expected to issue about $2trn-worth (equivalent to 7% of gdp) this year, after accounting for redemptions. Euro-zone governments will collectively issue perhaps €500bn ($513bn, or about 3% of gdp).

Accepting that multiples of sales is way down the list and directly influenced by interest rates, I do believe that the multiples achieved will start to recover soon and with that our multi year period of no NAV growth (and thus profit) will decisively end. Then organic growth of portfolio will drive a good period.

As an economist I am unsurprised by “sticky” inflation held up by wage inflation. Going into the commodity led bout of inflation wages lagged as they themselves are “sticky” and take time to adjust. It is normal coming out of a commodity based inflation wages will lead for a bit as workers play catch up on real wages. It is only if real wages rise over the cycle do we have a wage driven inflation problem which we don’t. US economy still overheated a bit due to Biden stimulus and “safe haven” flows in time of war risks.

Freezing the Russia Ukraine conflict with some reduction of energy sector sanctions helps EU and will be strongly deflationary. Many commodity prices held up only by risk not supply demand. We are heading soon to a world of sub 50 dollars a barrel oil soon and that will cause some EU very low inflation rates.

Alas.

I’ve not had the time nor tools to run a proper “shift share” analysis of what influences GROW SP the most (outside of company specific news). But as you say global interest rate expectations are key.

Metrics that seem to most influence GROW are (and some are interrelated and thus overlap so some double counting:

1) US interest rates (more important for GROW SP than Uk rates by some margin).

2) UK interest rates

3) EU interest rates/Chinese rates, etc

4) multiples of sales/valuations for unlisted tech sectors (key valuation metric)

5) multiples of sales/price for IPO’s in sector (if IPO’s flowing).

6) direction of listed global tech indexes (quite a big disconnect possible over quite a long period of time).

7) dry powder available (dry power can sit on sidelines for quite a while)

8) growth of traditional funding into unlisted sector such as loans.

9) differential between US and EU valuations of similar tech companies at similar development points in pipeline (currently EU around half of US). This seems to have widened with dip, Russian invasion and growth of anti EU right. US politically unstable too but not in a way that might break up the US single market.

(Drew Sanders/PitchBook News)

As we begin a new year, the consensus among venture capitalists and startups is that the worst is behind us and 2025 will be a good year.

For countries across the globe, expectations of renewed dealmaking, higher valuations and more open liquidity markets abound.

As before silly sp. Not improved a tiny bit since our float in 2016 yet portfolio it is based on is much larger, deeper and stronger. Either we were significantly overvalued in the whole 2016 2022 period (and all independent brokers giving guidance in that period were fools) or we are significantly undervalued now. 8.5 lost years for the 2016 investors.

Sector’s values are hidden and only estimates until the price discovery of funding rounds and IPO’s. Sooner or later there will be price discovery on the whole of our core portfolio (as well as trades on our % ownership of seed funds). Either our NAV estimates will be confirmed, exceeded, or shown to be over egged. So far confirmation seems to be the pattern even in a dire market showing that our NAV estimates for the underlying companies are about right even in current market conditions.

So much upside potential yet so many downside scenarios in the background market to create short term jitters.

I have friends who sincerely believe that Trump’s inauguration will help. Maybe faith based animal spirits will indeed help. At the moment last leg Biden sanctions on Russia pushing up oil prices and with that inflation expectations so the reverse might be positive for us.