Member Info for steph

https://www.theguardian.com/business/2022/aug/30/wholesale-gas-prices-tumble-as-europe-prepares-to-intervene-in-energy-markets?CMP=Share_iOSApp_Other

As it does once the swing down really starts it will overshoot on the down as well creating deflation risk.

Best thing government could do right now is intervene in the energy market to flatten prices. No reason renewables should have this windfall and high gas prices can be smoothed by the regulator over many years if just a temporary spike. Spread this spike over 10 years and inflation will “magically” come down sharply. Truss not a thinker though. Whole tory front bench pretty poor but labour hardly setting the world on fire with new ideas. We are unnecessarily sleepwalking towards an avoidable recession brought about by 3 to 4% central bank rates. GROW companies will keep up a fast pace of growth through and not run out of cash but it wil be a couple of months until GROW management can “prove” to the market no reason for any steep discount to NAV/share. Market not giving GROW management the benefit of the doubt right now. More information needed in these choppy waters.

We are crashing due to inflation fears driving interest rates much higher.

The inflation is commodity not wage driven. Wage inflation lagging prices and BOE surveys indicate public not expecting inflation to last so expectations not embedded yet.

Commodity inflation is by it’s nature a “one off” . Oil goes up to 137 but it can’t keep going up in real terms. At some point it will flat line or decline and inflation from that source will be zero or negative. Ditto for gas which had had a supply side shock even more severe.

Once the market absorbs the current energy price there is no further inflation due to energy costs. Conversely I except oil and gas prices to return to norms pretty quickly.

Can call them. I’ve sometimes gotten an answer.

Id imagine given the high level of anxiety there will be a trading update soonish. I’ve assumed mid October (voering the half yearly results) but like this year they can go middle of the last month of the half.

Any update without a profit warning will be considered very good news in this funny market. July 2022 finals clearly without a profit warning means grow management were confident even in the middle of this awful market no net NAV/share decline in the works. Market not deteriorated since July. Indeed up a bit against July. I’m expecting news that will steady the sp.

I’ve been topping up even with uncomfortably high leverage so convinced am I we are near at absolute bottom. Wish me luck. If I had more cash I’d buy more. I have pencilled in 5x uplift over 3 years from these levels.

Us tech doing its best to pull us back down after a great day.

Much evidence that UK/Eu start up venture capital market more conservative than USA (measured by multiples of sales and other criteria) and thus better protected against any downturn in sentiment on valuations. We have gone down in lockstep with US jitters on valuations of unlisted tech but when the fog clears on our half yearly results coming up there will be a surprise on the upside.

Both our broker targets (Jeffries and berenburg) have said on average 10 quid within 12 months. Down a bit from our September 2022 high but nice to have never-the-less. From there onwards and upwards I think as the general market settles and our portfolio continues to expand sales and gets ready for IPO’s when the market is ready in a couple of years time. .

Topped up as well today.

We survived the Fed panicked reaction. Not much bad news on interest rates that now can be thrown at us. Our companies are those more than willing and able to pass on inflation to customers, present and future, or they would not be fast growing new tech in the first place. Fast growth indicates pricing not sensitive. Inflation so long as you can pass it on flatters NAV in nominal terms.

https://my.pitchbook.com/viewnewsletter/1V0s3-YNyCk/pevc

The NAV/share is not automatically the SP value. In good times we had a long debate on this forum on the appropriate premium over NAV/share we should trade at and opinions varied from a modest 20% or so to 70% (which I argued was appropriate given our growth rate and the difficulty in acquiring the same portfolio -especially as a retail investor).

Now we ae in bad times and we are debating the appropriate discount -if any at all.

I rather accept GROW management at their word that there will be no decrease in NAV/share this year or next. This seems to be confirmed by analyst’s forecasts. As they mention there is no need for 80% of the core to go to market anytime soon and when they do in 2+ years time to fundraise or IPO they will have had 70% plus annual sales growth to counterbalance any decline in valuations per unit of sales. While there may well be a few core holdings that will suffer a decrease in NAV this year or next the winners will outnumber the losers. We have had losers before. Unnecessary panic to assume we will have overall losses. If this was likely, or even a strong possibility, we would have had a profit warning by now. July year end report was bullish that NAV gains will outnumber losses. Decline in our 3 traded shares already baked in to last results and have not declined further since then. Probably same for our valuations of the unlisted. Seed funds are in rude health in spite of the downturn as well as early rounds. Money still flowing into sector even as a few late stage unlisted tech that got frothy needed valuation haircuts. I trust we don’t have many of those and to the extent we do the haircut already applied unilaterally by GROW as part of year end valuations already quite sufficient.

Very fast sales growth of core portfolio indicates good stock picking so we can outperform sector on valuations.

Agicore

Appalling that the market does not recognize it.

For me it strikes at the heart of the reason for existence, the business model and operation model of a retail trust that owns nearly exclusively private equity firms. Normally the investors in such entities would themselves be large funds able to extract a lot more information than we are being given -before they invested in a trust like GROW.

IN good times the retail investor model works well enough. maybe it was more suited for the AIM than FTSE 250. In any case in time of market stress the lack of information means the market will assume the worst case and thus create unhelpful volatility beyond the general market volatility. The precise opposite of what investment in relatively illiquid private equity should do.

Excess volatility has consequences. Investors big and small will need to be compensated for it and that reduces what GROW can get relative to NAV in any future fundraising. Last time GROW fundraised it got trailing NAV/share. That will not happen again for a long time.

Volatility can not be eliminated nor should it. A retail fund will go up and down with the sector and market. Excess volatility relative to the sector can be smoothed with more information and maybe some share buy back. Maybe time to start paying a dividend.

appalling. i don't think we would be so volatile with more information about the individual core holdings. unknowns are assumed to be worst case.

black box approach only works when sentiment stable.

value destroyed by lack of information. .

Much much larger portfolio measured by multiples of sales which is the normal benchmark for unlisted companies.

Markets expect interest rates in UK to peak at about 4%. 2 year and 10 year guilts are about 2.7% now.

4% is hardly earth shaking and in fact is roughly the norm for 350 years. Presumably it will then fall below 4% agains as the recession bites and inflation comes down.

Friday Fed statements causing volatility for sure. Quantitative tightening in USA is certainly making markets jittery reversing in part the July/August mini rally. QT can affect the real economy by making corporate borrowing more expensive and thus job creation will slow. So called junk bonds very sensitive to shortages or surpluses of capital.

All a bit of a distance to the EU non traded tech sector we are in but we go along for the global ride it seems and at amplified ups and downs.

I personally don’t believe we will ever hit 1/3rd of stated NAV/share short of thermonuclear war. Sensible investors will appear long before then. I assume they are waiting on the sidelines for the Friday FED statements to determine if we ahve bottomed yet.

Be a good time for some director buys or better yet for GROW to buy a few of it’s own shares.

https://pitchbook.com/news/articles/H1-europe-vc-valuations-chart?sourceType=NEWSLETTER

no evidence to support sentiment that we are about a big haircut in valuations.

yes article says might play out over multiple quarters but that means valuations against a set multiple of sales not our companies specifically who are growing sales at 77% pa. our fantastic sales growth means no decreases in nav even in a cooling valuation trend for the sector.

Yes many bargains out there but if they are consistent with their assertion NAV wil not go down best value is now to buy own shares. Would aid stability and be a great investment.

Investors in Chrysalis are paying now for Klarna losses

https://www.thetimes.co.uk/article/52e9286e-223f-11ed-83fa-560ae4fda953?shareToken=679af2da7ddb871cfb8ed20f31bc3454

All major G7 heading for a recession. This will cool inflation pretty fast and with that further interest rate rises.

ECB jumped the gun in 2013 and will be keen to not repeat. Once fear of a deep recession becomes the policy driver the recent interest rate rises will stop and get reversed. Probably pretty fast.

Don’t see any reason for optimism on the Ukrainian war driver to energy inflation but a stalemate will in time lead to neutrality of influence. Russia can only cut gas supplies to zero once. Alternatives including liquified gas will develop.

Silly sp. NAV 930 per share and sp 383.

We reported in the worst month and fully absorbed the losses of the 3 IPO’d shares. They have gone up a bit since then.

Lots of evidence EU seed funds not devalued at all. Nor the cash we hold nor early round valuations. the roughly 40% of core portfolio valued at sales multiples are the same as we have used for years. Not all of last round valuations frothy and those that might be have had a GROW haircut and a statement that growth in the rest of portfolio can absorb any late round lower valuation by one or two core holdings. And how big can these be? Nothing can cause a real NAV/share of 4 quid now short of thermonuclear war.

https://www.telegraph.co.uk/investing/shares/inflation-may-have-peaked-investors-need-change-stocks/

Of course methane gas and UK exceptions but market for GROW move in line with US and EU.

If inflation has indeed peaked central banks will stop raising interest rates and our SP will fly from this point of staggering discount on NAV/share.

As after March 20 2020 in the epicenter of the COVID panic when we hit 2.71 I think we will start to have a sharp recovery starting soon -October at the latest. Fears of a substantial NAV/share haircut exaggerated. Quite understand why superficial analysis might suggest the non traded core portfolio might be worth the same % less as the post IPO 3 shares visible but for lots of reasons (with the exception of one or two SAGE points out are vulnerable to a NAV devaluation) this won't happen. Seed funds will not devalue. Money flowing in the sector as fast as 2021, maybe faster. Portfolio valued on multiples of sales valued on same multiples used for years not some recent 2021 surge. Early stage funding valuations not frothy. GROW applied a substantive haircut on some late stage valuations -which is not fully appreciated by market yet. GROW has cash that can't devalue. 3 traded shares have been sold down substantially so less % of portfolio and they have recovered a bit from lows. GROW's core portfolio growing a whopping 77% pa which can absorb quite a large haircut on valuations per unit of sales without any decrease in core company NAV. Time is on our side.

We are lagging a small recovery by peers . Wonder why?

Haircut market expecting is concentrated improbably on a few late sage core holdings as seed funds, early birds and cash have no signs of declines from conservative sales based valuations. Would need massive 70% 80% haircuts on 5 key core companies to justify our 65% discount to NAV/share. Jus improable.

Poor communication I think on GROW’s behalf. They were too used to being private themselves just a few years ago and the lack of FTSE 250 scrutiny since. They are too coy on runway lengths and share specific valuation basics such as share specific sales growth vs share specific valuation points so we can see if multiples are changing and by how much. Can’t see why they can’t show that. Is it really some big secret?

Cheered they say 80% of core has runway lengths over 2 years. Unlikely therefore fundraising this year locking in lower valuations but what if this dip lasts 2 years? Can companies in their structure ease back on growth and thus burn rate in year 2 and extend runway lengths? Key question that we have no shred of info about.

that said I think much of this panic will be over mid October when we get the interim results and I believe interest rate fears generally will be receding. Just need to hang on for a bit.