Member Info for steph

Molten trades at 0.44x NAV, below its peers on an average of 0.59x NAV.

https://www.edisongroup.com/research/nav-reset-reflects-falls-in-public-markets/31560/
https://www.edisongroup.com/equity/molten-ventures/

Berenberg, PWC (auditors), the fund that created the credit facility (which GROW management said gave the NAV calculations a deeper look over than PwC).

I read a lot of pitchbook AI analysis. Secondary market for unlisted trading at half peak. Multiples of sales valuations peaked at 13 but our March 22 valuations where multiples were used “only” 7.9.

For me Berenberg saying in February 2023 in the middle of this current market that we are 150% undervalued is good enough for me. It is highly unusual for a broker analysis to overstate 12 month potential. they have no incentive to do so. We have often outperformed broker guidance.

UK Food inflation driving stocks perceived as linked inversely down today.

Any major sector expert holder of our GROW could end this dip below 5 quid in an instant by building up a stake using this level to do so. Clearly they could but chose not to. Perhaps they think the dip has not run it’s course. Perhaps they are not looking day by day at the SP and are in for the long haul as they do as corporates directly in the same unlisted stock on the rounds.

I suspect it is more of the latter. I think Berenburg speaks for the experts in the sector with a 12 month target of 900. Obviously no move towards that yet but it will come -probably around the time interest rates have clearly peaked. We are not there yet.

Isar was given a haircut in our books from the march 22 and September 22 valuations. So it turned out to be an overly cautious haircut.. no need.

I honestly think this sp pricing in massive further haircuts across our whole core portfolio is nonsense.

Let us hope on results our NAV calculations get more credibility in the market however that is done. Right now the market does not trust a NAV/share of 840.

Yet more evidence that we might not need to fear next rounds. At our discounted last round valuation we may even get increases on average. Certainly that was GRWOS guidance for year end results due out shortly.

For 18 months history is certainly on your side.

For my money I think we are at around an inflection point and we will start to up again faster than you predict. Of course it will be choppy but choppy on an underlying uptrend.

Months not years to recover some dignity at around 6 quid. Maybe a year and a half to get back to plus 10. 3 years to be well north of our old 11.82 SP.

I agree a risk is a couple of the 5 key core companies need a new round and get a substantially discounted value exceeding what we already have on our books as the discount.

DOn’t see that as having a big hit on our SP. SP is 66% below a NAV/share -which is a NAV/share already discounted by around 35% on average against last rounds. So that “hit” is priced in surely? No evidence down rounds are exceeding 50% discount on last round and we are nearly there. Already there if we include the effect of our preference shares.

Our biggest shareholder even in GROW itself, never mind seed funds) is the government in the form of the Irish Strategic Investment Fund. It is the nature of the sector.

At their best seed funds are blended co-investment of public and private. Private investors in the pot keep government investments focussed on profit and not just wooly policy objectives.

A good analysis of GROW strategy below.

https://techcrunch.com/2021/08/03/why-draper-esprit-doubled-down-on-its-status-as-a-publicly-listed-vc/

Weirdly seed funds may be the beneficiary of increased government funding (COVID shift) as well as some dry VC powder that is reluctant to invest in late rounds and of course the IPO bottleneck. Late round companies don’t want to raise at these prices or IPO so a stalemate and that means “dry powder”. .

One interesting thing is that there is no evidence that EU seed funds are devalued. The drops in teh pipeline seem concentrated in late rounds of VC.

Seed funds holding value may be true. They are too far away from marekt to be much affected by the interest rate turmoil. There are multiple exists for seed funds. A good patented product or IP can be bought by big tech directly skipping the whole painful grow your own company to make and market whatever it. No you will not be a billionaire but you could be rich. . That nearly happened to a friend of mine and he should have taken the cash as he never was able to grow the company to fully exploit his own great IP. IN the end lost it all.

Agree with all that. Shamefully I can call myself an economist -LSE and all.

I’ve on this blog consistently predicted that oil and gas prices will come down faster than everybody was expecting and with that take the pressure off surging inflation. . Tick for economists.

Where i’ve faltered is guessing the speed this wil influence wholesale prices and wages. It seems many manufactures have been slow to pas on savings and are “hoarding” margins. Wages were always going to lag and I am caught by surprise the central banks do not seem to take this natural lag into account when setting interest rates. I think they are overly hawkish as a result. .

I’d agree with all that. The pipeline has high risk at the beginning and lower risk at the end (when large profitable tech has stable visible profits and domination of a market nich that is hard to dislodge -barriers to entry).

So yes while the whole chain moves up or down together there is a second factor of risk which causes different bits to behave differentially. Riskiest of all is seed. Just ides and many of them and few if any barriers to entry.

SO for GROW to really fly needs both. A risk on climate and listed tech having a good period. We are not there on either yet but listed tech recovering faster than GROW. SO maybe a lag that will shortly correct itself -or GROW simply more sensitive to bank jitters and until those go we will be in the doldrums plus of course the wait for interest rates to start declining maybe later this year.

My thesis and I call it no more than that is there is a complete pipeline for start up tech. Idea and seed funding. VC rounds, net profitability and IPO exit. Of course many try to skip the net profitability step before IPO and the market sometimes tolerates that.

Listed tech making good net profit is the end state for all our little babies. The greater the P/E ratios of teh listed tech sector the higher the end game pricing all the way backwards (or upstream as the analogy goes).

Yes of course different sectors in the value chain will react somewhat differently to changes in interest rates (the rate of risk free capital available). My thesis is that while there may be differences all parts of the value chain are connected and affected by end state pricing.

Our share can not seem to make up it’s mind if it should go down with the banks or up with US tech 100 as an alternative asset class largely unaffected or in the medium term benefiting form banking jitters.

For my money I think we will eventually track US tech up no matter what is happening on banks. So watch US tech 100 movements to see our future. Currently approaching pre covid boom levels.

You

Be great if you contributed/shared on one or two aspects of the “more going on” that you may be aware of. Whole point of a blog is to share and test analysis to mutual benefit.

Fo my money I think our sp has overshot on the downside. Can’t see justification for much below 2/3rds NAV/share. I expect a volatile drift up from here over the next 2 months up and down but more up than down reaching 5 quid by end of July final results.

From there depends on the IPO market beiing partially repaired. . Seems that is needed even if private corporates sales are the mechanism chosen. Sort of the ultimate destination of the pipeline.

One thing that puzzles me is on the fair value extracted by sales multiples we had a weighted average of 5.1 in march 2020, 4.8 in March 2021, 7.8 in March 2022 and 7.1 in September 2022.

Pitchbook research says we never were part of the peak in multiples of 13 but that vc is now down to 3.5 or so. Of course our portfolio is not typical of pitch books vc research and in the sub sectors we are in the multiplse may well be higher.

Worth comparing the portfolio reviews on year end results 2022 to half year results 2023 found on pages 34 and 18 respectively.

Aiven went up from 105m to 127m. THe rest of the big ones were discounted in only 6 month sby around 35% and this was mitigated b preference shares to the actual fair value of the companies was -50%. Also the March 31 2022 valuations were affeced by the declng market.

Wighted average of multiples was 7.8 in 2022 March 31 but declined to 7.1 in Spet 30 2022. Last round valuations cover the big ones.

Graphcore went formn 115m to 73m. Ledger went form 92m to 69m. Revolut went form 91m to 64m. ALl that in spite of preference shaes.

So with the exception of Aiven key components of core valuations discounted already by 50% against last round.

Not bad. Really no evidence unlisted tech market has tanked more than that and sales growth allowing companies to catch up a bit to 2021 valuation.

Too much fear built into in our SP on low probability outcomes. .

https://pitchbook.com/news/articles/secondaries-VC-startups-discounts-pickups

The secondary market in shares in unlisted tech is the closest we will come to real mark to market pricing trends.

ROughly 50% off from 2001 highs. We are discounted overall on our core by 30% which varies between 80% and 15%.

Maybe we have a better portfolio than the average maybe not. Our preference shares mean we have more value on the same decline than an employee trying to sell shares privately.

Assujming we “should have “ discounted NAV/share by 50% not 33% That gives us a real NAV and SP in current market conditions circa 7 quid not 3. Our SP assumes much greater discounts than the average secondary market is indicating as necessary.

I hope our NAV credibility goes up on preliminary year end results due out end of April. Just saying it has been tested by independent actors just not cutting the mustard. Need more detail.

https://pitchbook.com/news/articles/VC-markdowns-fair-value-LPs

Very short run bank instability hurts us a risk off environment when we are considered risk on shares.

Medium term though bank instability good for us. Spooks the central banks and helps reduce economic and jobs growth enough to put pressure on rates and QT to convert to lower rates and QE sooner rather than later. We will not really fly until rates coming down -so joined at the hip we are to that indicator.

I do think as an asset class unlisted promising tech that has some commercial sales (therefore not dot com great idea type shares) at margins that are already profitable are the companies of the future. Of course there will be churn (many will go under and others will fly) but in aggregate should outperform all other asset classes. That is the basic offer of GROW for us and that offer has not changed for those of us willing to look past the current volatility and doubt.

It is a pity about the volatility. As a store of value you can draw down when needed in a pension GROW has taken a hit for those of us who are not wealthy enough to not worry.

Fo rme GRWo at these prices are even more 100% of my pension pots. With hindsight that was silly but going forward I am where I am and need to hold through this odd cycle. Can’t be true that grow has not increased anything in value since went public in 2016. Just the hard cash realization have been well beyond current CAPEX of GROW at this SP level. That money has not been wholly or partially destroyed on late stage or buying in IPO’s strategy. It was was reinvested in seed and early stage rounds which have shown no sign whatsoever of any decrease in value. Time is on our side as those investments in aggregate mature through the process.