Member Info for steph

Investing.com may be nothing more than AI generated assumptions projecting losses incurred in the last 2 years of NAV/share too far into the future. Core portfolio continues to grow sales (themselves with healthy margins) at a 50% clip which is the main metric of valuations of unlisted shares that do not have a recent funding round to establish a market price for an unlisted share. Only need a stable (not falling) market for rapid NAV/share increases for GROW to occur and with that the big discount to NAV/share for our SP.

So unless a significant % of the core portfolio is going bust (no evidence of that) “losses” will end soon. Even Graphcore the most challenged of all our core portfolio in terms of viability is probably work what we have it for on the books or more.

We have been “losing money” only by using some pretty conservative industry valuations on core portfolio. Also as triple point indicate peak trough of valuations phase over.

https://www.telegraph.co.uk/business/2024/03/08/revolut-investor-slashes-fintech-valuation-5bn/

Irish time report that GROW have a 5% stake in Revolut. GROW in half yearly report Revolut on the books of 55.2 m pounds. That implies that GROW value REVOLUT at 11bn about half of a recent revaluation by Triple Point.

Https://techcrunch.com/sponsor/great-britain-northern-ireland/has-the-uk-become-the-best-place-in-europe-to-invest-in-tech/

So why is our SP at 8 year lows?

Great link thanks

At some point market will revalue grow. probably sharply

Sales growth of cord portfolio is in all annual and half yearly reports. it can be misleading at the company level as fast growth from a low base less impressive than fast growth from a large base.

never the less a key kpi as it averages in the slow burners as well as high growth. they said in methodology they weight it by company nav so meaningful average

On average across whole core portfolio 50% plus sales growth so pretty fast

OUr SP appears to be at a large discount to NAV/share for the following reasons. .

1) FSA misapplied regulation confusing a 100% liquid retail trust with an illiquid closed trust holding the same assets. The retail wrapper creates a mark to market in between (bi yearly) NAV/share calculations during a market downturn (buyer beware) so no need for FSA to stick their nose in. Risk reward adjustment covered by market mechanisms.

2) Retail wrapper creates a black box of limited information on the underlying assets that causes excessive anxiety in bad times but was not a big problem when the times were good.

3) has been a verified decline in NAV of VC tech start up sector although drop appears to be ending. Most of decline concentrated in last round and IPO end of value chain. As the SP’s fo medium sized traded tech recover IPO and last round market may follow.

4) misunderstanding of NAV calculations by GROW management and underweighting of complicated preference share protection.

Way back I stated on this blog that we in the long run should trade at a 70% premium to NAV/share due to rapid NAV growth and the inability of retail investors to get that rate of growth in any other way. Maybe that 70% premium will never happen. However our historical average is a modest premium to NAV/share. We will return to that at some point plus our NAV/share will start to grow again (within a year) and pretty sharply due to sales growth.

RIsk for me is GROW going private again. While that would be a a higher SP than now would not be more than 50% premium -well below what I think our medium term value is and leave me permanently out at a discounted price. For now the retail wrapper is destroying value. That will pass but when?

Problems of FSA regulation have been there in full since 2018 but only have hit SP since the downturn (unless you consider our 11.82 high as not high enough). Maybe did not matter when the mood was good but exaggerates the shift down when the mood is sour.

Seems this conservative government disconnected from the financial sector during Brexit vote itself and afterwards (during the negotiations on protecting the financial services industry in any post brexit arrangements). Hard to imagine under thatcher or major such a regulatory anomaly happening. Thatcher was responsible for the rapid expansion of UK financial services through the “big bang” and was always an advocate of the single market.

Any regulatory branch of government tends to have “mission creep” if left unmanaged. FSA has not had clear oversight within a comprehensive strategy since for upheaval of Brexit.

Not reassured by Baroness Vere on behalf of HM Treasury saying more consultation needed. FSA did not consult on this unusually restrictive approach compared to our peers so why consult on it’s alignment with international norms. Just do it. Obviously doing much harm with only the vaguest of possible upside.

Https://researchbriefings.files.parliament.uk/documents/LLN-2024-0009/LLN-2024-0009.pdf

Https://hansard.parliament.uk/Lords/2024-03-01/debates/930EAEDF-141A-4836-A616-9A76D2B68C5C/AlternativeInvestmentFundDesignationBill(HL)

This does seem to be the explanation as to whey mysteriously we are 1/3rd and not 2/3rds NAV. It is not a problem with NAV calculations themselves or some pessimism as to when we will start seeing NAV/share increases. It is regulatory incompetence that, hopefully, is temporary.

The FSA needing primary legislation to fix this shows how out of touch they are. Fortunately Labour and lib dems not in any way objecting to this sensible change. It will come. Hopefully soon.

All party agreement FSA harming listed trusts by misapplying expenses.

Of course in a closed trust the price paid may have moved downwards and some provision is needed for that possibility.

For retail fronted trusts the discount is factored in in 2 ways. Updates of NAV half yearly that are audited to be market conditions and the discount to NAV that the traded share has. The holding is traded and is 100% liquid by the second same as any other share on the market.

Well that is an excellent explanation as to why we seem to illogically underperform of late. Regulatory screw ups (change) are normally at the root of long term value decreases such as with UK banks post crisis. Barclays has never recovered it’s pre crisis SP.

How long has FSA been applying this, how vigorously? Why did this not prevent our run up to 11.82 in 2021?

IN any case relaxing FSA on this wil cause a boost. Can’t see Labour against either. Current government complete mess. .

I don't think any if our core portfolio is on our books for more than 2/3rds of any last round valuation done in years 2021, 2022 when there was a modest surge.

i just don't get why our sp is below the 2016 float price back in 2016 in spite a a much larger more valuable portfolio per share. either im missing something or this is a massive unrealised value.

Reddit Prices I.P.O. at $34 a Share, in a Positive Sign for Tech

The social media company raised $748 million in the offering. Its shares begin trading on the New York Stock Exchange on Thursday.

Alas, sadly the telegraph has a lot of market news that the guardian does not carry. Can’t stand the columnists who are clearly paid by the owners to say the most ridiculous things about Brexit benefits, etc. but You can’t have it all. The paper will probably die off alongside it’s elderly readership. Even Liz Truss is lionized in the Telegraph -victim of the blob and not markets and her own stupidity it seems.

ANyhow for my money I think the new normal for interest rates is much lower than the 1945 2007 period due to basic demographics and trends. This blip up based on external shocks will be short lived and a footnote. War, rearmament and uncoupling of global trade tends to be inflationary but is not in total enough to counter trends on prices and thus interest rates . A real trade war with China would be inflationary but we are not going to get that. Just a few Trump induced skirmishes.

USA can’t wean itself off Chinese goods any time soon without a major drop in living standards. China in many ways can weather a trade war better than USA. They can pivot exports to BRICs, Russia and their own interior and they can shut down a large amount of the 180bn US imports (which excludes services and banking). Already happening. Will be a lot of angry Senators if anything sudden.

The rns today from the Irish sovereign wealth fund indicates the exact % dilution we will suffer due to fund raising. Of course the money injected adds to NAV but as it was injected at 2.75 and nav/share was 770 it will not be fully compensated.

So dilution is 7.8% mitigated by a cash injection that increases NAV of 2.75/7.40or about 5% net dilution.

So on total net assets of about 1.2bn we will need around 60 million in NAV upgrades to break even against half half year. Doable but unknowable. 50% sales growth should result in upgrades of much of portfolio but they have not done this so far. depends on comparables I guess. My impression is comparables in multiples of sales/valuation ratios have not declined so we might be in for a nice upside surprise. Market certainly does not think so so any good news (even year end NAv/share at 6.60 (treading water) will be welcome.

“If you want an idea of how the current fiscal and asset bubble in the US might end, pay close attention to Bernard Connolly, esteemed consigliere to hedge funds and central bankers across the world for the last quarter century.

It will not end in a soft landing – a “chimaera” – and will certainly not end in another leg of accelerating economic growth. Nor will it end in soggy stagflation.

“The invidious choice facing the Federal Reserve, he warns, is either to allow a deep economic slump to unfold, or slash rates to the bone before inflation has fallen back to target. The latter course will send the dollar into free fall and destabilise the world’s dollarised financial system, an outcome already being sniffed out by the reawakening gold market.”

Kind of my view. We are in for a renewed very low interest rate environment that will hugely benefit the GROW asset class. Too much capital chasing limited opportunities. Of course the upcoming companies of the future will be beneficiaries.

Well graphcore was on our books for 113m year end 2022, 108m year end 2021 and 86m year end 2020.

March 2020 annual report was based on a Feb 2020 150m fund raising round valuing graphcore at usd $1.95bn . So 5%

5% ownership of 500m (rumored sale price) is 25m. Modestly above the 22m on our books for.

So in spite of troubles Graphcore should not be a drag this time round. Our current September 2023 estimated Graphcore NAV/share sufficiently discounted from last round heights. I do hope the interest of more than one buyer stretches the price a bit. No news though. Does show management has been proactive in writing down value well before a down round occurs. Good on them. I think our circa 750/nav/share solid enough and no need for2/3rds discount. Should be only 1/3rd or 5 quid sp.

Clearly market thinks I’m wrong. Good luck all.

Or 4 large hatched chickens who are noisy and annoying all the neighbours.

Etc etc. Graphcore on the books for 21m and this is well down on peak of 108m which was never calibrated to Graphcore peak in the first place. So if company worth 500m and not the 2.5bn peak we are in for an nice upgrade, 20m or so.

This extreme volatility frustrating. I put my money here because I thought store of value. What better store of value than a good cross section of all new tech across UK/EU during a period in history when tech will be truly disruptive. I am not so sure big 4 tech really so immune to a big retrace. Lot’s of regulatory scenarios that can kill the golden goose for the top 4. Whole are of real ownership of personal data unresolved. They have been getting a regulatory free ride for a long time.

UK Banks have not moved SP in nominal terms for 12 years. New regulations after the financial crisis changed the long term profitability permanently. Watch the pen as well as the market

Is it not better to have 1000 small eggs waiting to hatch that 4 big eggs that someone might step on.

I massively underestimated volatility based on sentiment. I thought we would behave much like the locked trusts for unlisted tech but with the benefits of the retail wrapper and thus ability to buy and sell quickly. More fool me.