Member Info for steph

So much of our sp is influenced by US interest rates expectations. Seems a silly linkage to be so much stronger than grow specific information. Arbitrage opportunity I think if one has the funds.

ON US interest rates I expect a new leg down driven by even cheaper energy. I expect oil below 60 this year. High oil prices contains the seeds of of low and vice versa with a 2 year lag. It is a pendulum.

I also think in the us the low unemployment rate is a false signal of a hot labour market. Due to low wages many have dropped out. Employment rate is not hot. It has never recovered from pre- 2007 crash levels. It is 60% as opposed to pre 2007 crash 63% and pre covid 61%. Pay people decently and low and behold they register as looking for work.

US piling misery by high interest rates on the already low paid solves nothing . Wages have not been pushing inflation up. Wages are a lagging factor right now and “wage catch up” should be allowed so a period of wage inflation of circa 5% while goods are 2% for a year or two is normal to bring wages up to the real value they had in 2021. Central bank rates in that scenario should be stimulative to achieve GDP growth of 2% or better. That makes the wages more affordable.

means analyst thinks both market confidence in nav will return and the nav itself will nudge ip a bit rather than come down

good news

be interesting what they say after year end

looks like we will stay in basement until us tech turns on interest rate peak

uk eu will top out rates earlier due to different way of looking at labour market tightness but seems little help for us until us follow. .

https://www.theguardian.com/technology/2023/feb/18/the-ai-industrial-revolution-puts-middle-class-workers-under-threat-this-time?CMP=Share_iOSApp_Other

https://files.pitchbook.com/website/files/pdf/2022_Annual_European_VC_Valuations_Report.pdf

https://files.pitchbook.com/website/files/pdf/2022_Annual_European_VC_Valuations_Report.pdf

WHile nervousness certainly about regarding down rounds evidence is not there that any spike is happening.

2022 had 15% down rounds which is below historic norms of 25% in 2012 and 2013. Our NAV assumes downrounds will occur which have not happened yet and our sp assumes we have not discounted last round valuation enough.

Unicorns in 2022 were formed above number and value of all years except for 2021.

I think this panic where we trade substantially below our very conservative NAV/share silly. Based on fears that not likely to materialize.

Of all the linked indicators that seem to affect our sp the most us expectations of US interest rates seems to be the biggest.

Strange as GROW not active in US but I suppose the flows of money in and out of UK/EU tech is heavily influenced by the flow of us money in and out even if in parallel and not direct.

So we will not fully recover our mojo until the us rates stop rising and ideally start to fall. That is some ways off. Last q of 2023 and maybe not until q1 2024. Can we eek out some modest gains up to 7 or so in the meantime. Probably. Can we get back to 11.8 until us rates coming down and the whole ecosystem of IPO’s and relatively easy late rounds revived. Probably not.

We turned on the modestly bad news from US on CPI. US tech down .5% and DOW more or less flat so was not catastrophic inflation data yet we turned a 1% gain to a 3% loss almost immediately.

6.4% neutral

JPMorgan traders say the S&P 500 is set for a wild ride after Tuesday’s inflation report.

There is a 65% chance the S&P moves up 1.5% to 2% if US CPI comes in between 6.0% to 6.3%.

We have been 4.80 4 months ago under much worse market conditions (when it was not at all clear if inflation would come down fast enough to avoid 1970’s style interest rates). Now it looks probably that interest rates will peak only slightly above long term historical trends (before probably drooping to a lower band of circa 2% due to a long term restructuring of the market).

SO this minor correction has quite a bit of room to run.

I’m expecting that by late April (when our interim results come out and global inflation and interest rate expectations are more securely not in panic zone) we should be above 6. Quite a rise from 4.

I’m hoping by march 31 2023 the late stage and IPO market will start showing some signs of life and no need to assume any further haircuts to historical last round valuations on the assumption that very hard to sell if we ever needed to.

Mark to market when there is no market for unlisted tech is a very subjective exercise. The market was the last round implied valuation -which is not trusted and we have discounted up to 80%. Is mark to market the theoretical liquidation price if we needed to suddenly sell all for some theoretical reason. Is mark to market the probable price that will be achieved by the firms who can play the market and go for funds at a time partly of their choosing -which clearly would not have been 2022. Is mark to market what can be achieved by a firm that cuts the burn rate and thus extends the runway length to 2024 or beyond and thus does not need to fundraise until interest rates are projected to come back down again.

The quality of the component companies is key. Even a company with a burn rate but with excellent forward prospects will find adequate non stressed funding even in this market. It is a qualitative discussion not a KPI led discussion. the high percentage of truly quality companies in GROW portfolio is impressive.

CAZOo was an exception an for a bit looked like a wise short term investment that on paper we made a lot of money on. ALl indications GROW will not do that again. It was basically retail with a business model that was not protected by intellectual property against competitors and relied on funded advertising to gain market share. Advertising is not tech sector investment at all and should be a red flag if a significant % of expenditure.

So much great stuff there.

Analysis of VC valuations and exits show that those that have patents out value and out perform those that do not.

While patents on themselves do not necessarily add value (can be too academic and not “near market ready stuff”) the existence of sector activity specific patents is a good indicator it is a genuine tech company with a unique market niche it can protect and grow into.

Sp down 12.7% over 5 years and 5 years ago was not a particularily frothy period for our share or the market. What happend? How can the fastest growing sector in the marekt have such a poor 5 year performance?

My thesis is we are oversold and the sp is unnaturally low for the current marekt condtions -but who knows. Time will tell. Annoying.

And ledger was given a substantial haircut of circa 30% on valuation in our Sept 2022 half year results in spite of at the company level gong from strength to strength.

This market distrust of our valuations will end at some point and we will jump . .I think sooner rather than later.

https://pitchbook.com/news/articles/nextracker-hesai-nasdaq-ipo-listing

we will not recover our mojo until the late stage funding and exit market reemerges. that is the fear that 80% of our core portfolio may need to go get money in stressed market conditions.

i think the fear overdone but evidence needed

we recovered fast from the covid march 3020 dip and in a steady 12 month rise. i thought we were on our way october 2022 with a 2 week rise from 2.4 to 4.8. sadly no and we have drifted aimlessly for 3 months since.

at some point this will start a sustained 12 month rise but when? i have pencilled in late abril 2023.

bought a few just now. convinced we are about to jump.

we were more stable on AIM.

silly sp to be less than half an already discounted nav/share from last rounds. bad news priced in that has not happened and probably never will.

Anybody was able to log into investor day?

Looks like we sold down half of GROW’s Trustpilot holding.

I’m all in favour of selling down to zero all 3 publicly traded shares. Better use can be made of the cash upstream.

https://www.telegraph.co.uk/business/2023/02/08/central-banks-fighting-wrong-war-wests-money-supply-already/