 Just repeating my post of the 13/2 .Lets see what happens on Friday ...!
Simon Thompson in I/C..
....Even if investors apply a harsh liquidity discount, its difficult not to see AssetCos stake in Parmenion commanding a market capitalisation of at least £60mn (41.6p) as a standalone entity. Thats because the platform is benefiting from the digital transformation in the asset and wealth management industry. Ongoing consolidation in the sector and a reducing number of available quality targets suggests that the independent valuation is well underpinned, too.
....Its reasonable to expect the asset management operating business, which had net assets of £26.5mn (18.4p) including £11.2mn of cash in the 2024 interim accounts, could command a valuation close to book value as a standalone entity given the cash backing and progress being made to achieve run-rate profitability.
.
Memo .From the Assetco Circular of 28/1/25..
In September 2023, we responded to speculation around the value of our structured 30% equity interest before dilution for management interests) in Parmenion,obtaining an independent valuation of that interest showing a value of between £75-90m.
Based on recent discussions with the Companys advisers, the Board believes that this continues to represent a fair assessment of the value of the Companys interest assuming an arms length sale of the company as a whole |
Yeah SpectoAcc, the price move now is suggesting a form of release here. They are still coming in nicely here to buy. The current buying is close to the offer of 35p presently, and the price is moving on alot less buying, so it could breakout.
If the price is threatening a break higher, you would think that the sellers who don't want to hold before the split might have sold now, or the price just sits down at 31.5p. We're now up at 34.5p with the offer of 35p probably going to get cleared the way these streams of buys are coming in.
Next week key dates:
Results: 5th March
Record date: 6th March
Expected new listing of split shares: 7th March
It looks like buyers here must at the very minimum get back this amount.
The bar is low because the market is garbage, but an encouraging price move, which might suggest some cause for optimism next week and the weeks after.
Ooerr...too much bullish?
Roll on next week!
All imo
DYOR |
Nice write up in the IC Simon Thompsons top shares for 2025 |
Feel you're right - good riddance to the Welsh Wizard, with his ability to make money disappear (don't know what he paid to acquire his stake in ASTO, but guessing there isn't a profit there).
Just Panmure on the offer now, bid up to 32.4p. |
Wondering if Griffiths is close to cleared here.
We saw prints of:
1m @ 31p
800k @31p
627k @ 31.5p
550k @ 31.5p
Then a further two hit last Friday:
400k @31p
200k @ 32p
Panmure who had the sell order have moved back up on the book. The price isn't being dragged downward now. One market maker has moved up to 31p on the bid today. You could buy hundreds of thousands with ease before, can't now.
They are paying full ask of 33p for 70k and 150k today.
That looks like the bottom is in as far as the pre-split move is concerned. Curious to see where the rest of the market is sat willing to sell and whether this can move from here.
All imo
DYOR |
I share your view @spooky and your argument regarding a possible link between the timing of a sale and cost of loan makes sense and it’s an interesting intuition.
However, if we want to reason about what could go wrong, key risk here is not related to the timing of Parmenion sale IMO: it’s a cash generative growing business with favorable structural trends - being it sold within one year rather then within three years makes little difference I believe… Nor the value of the sum of the parts in Assetco which clearly gives a good headroom on current market cap is concerning, I believe. I mean, we can stay here splitting hairs and it’s all fun and interesting, but you don’t have to be a rocket scientist to see that Assetco shares are mis-priced IMO…
The more I think about the situation the more I’m convinced key risks here relates to rights of minority shareholders after split - particularly in regards to B shares as @jane deer highlighted in a very well reasoned comment which was a bit of an eyes opener for me. |
I could say a lot of things here but i won't. Remember the cost of the loan is high, Parmenion will not want to continue paying this for long. There are reasons for a number of interested parties wishing to achieve an acceptable exit within a reasonable timeframe IMO. |
Thanks a lot to both of you, @jane deer and @Theaim1990, for your insightful comments.
@jane deer - you raised important points of concern which I admit I had probably overlooked.
I don’t see the timing of Parmenion sale as a significant risk since it seems they are doing well as a business and possibly this is not even the best time to exit given the current state of the market and valuations…
What you brought to my attention and I think it could be one of the main concerns for me personally is the risk of delisting. I hear you on that: being the B Shares’ minority holders not protected by Takeover Code, Harwood Capital - or any significant shareholder for that matter - could potentially accumulate enough votes to delist B Shares without having to launch a mandatory offer. And this is a risk that didn’t exist before reorganization as Assetco was and will continue to be subject to the Takeover Code and to the mandatory bid rule. To be fair, this is a risk that brings together all AIM shares with controlling shareholders above 50% as, if I understand correctly, controlling shareholders above 50% can increase their shareholding without being subject to any restriction and without having to launch a mandatory bid. Anyway, that doesn’t remove the risk in our specific case…
On one hand, I wonder why they didn’t carry on the plan to delist B shares already by making them trade on a matched bargain base as originally planned if that was their ultimate intention (maybe thy received some pressure from shareholders?)
Moreover, the behavior of insiders - which have decided to publish a valuation of Parmenion stake twice a year as @Theaim1990 points out - is not conducive to those that would like to accumulate shares on the cheap, but more to those who wish to highlight hidden value…
Nevertheless, I wonder what can minority holders do if the risk you highlighted materializes. I have never had the “pleasure̶1; of owning unlisted shares and have no idea what happens in that case and how one can dispose of his holding in such circumstances… I understand there is no withdrawal right for dissenter shareholders if a delisting is approved on AIM, but I’m no expert in this subject so if you know better please enlighten me. At this point in time, this is the only risk that could truly make me think twice about my position. I struggle to ponder such a risk as, having no experience with unlisted shareholdings, I have no idea what can happen and what’s the downside in that case… It’s a bit of a blind spot for me, I have to admit… If anyone has some experience in that regard and can provide any insight into that or any additional food for thoughts on delisting risk I would much appreciate - I think it’s one of the most interesting subject which was raised so far on this thread and one of the key differences with the pre-reorganization structure and therefore one possible explanation of why one would prefer to sell now while preferring to hold pre-reorganization.
All imo - DYOR. |
On Griffiths - has been selling since well before the split announcement IMO, the RNS was the crossing of a threshold. |
Yeah, the info are hidden since the entity is in Guernsey.
Two years ago it was paid in cash, so seems it is a flex PIK loan.
You cannot add the two, but that was to say at a sale/exit event the loan to Shillay gets payable and so c.100m go to Shillay (c.30m notes of the B shares), and the rest gets distributed to the diluted equity interest. That's my interpretation at least.
Jennings is an extremely long-term, value-creation oriented CEO and I'm very confident Parmenion will keep going from strength to strength under his guide.
ebi seems also on a spectacular trajectory (for reference it made more profits after tax than Fundment, with half the revs).
Not sure when a sell/exit will materialise, not expecting one in 2025 but who knows. |
TheAim1990
There are many points in your post I was not aware of - thanks very much for that.
My understanding of the PIK interest loan (but I feel a bit shaky as it is not clearly spelt out anywhere that I have looked) is that the PIK loan has been issued by Shillay Midco and is held by AssetCo plc (the parent company) and I assume also by Preservation Capital. AssetCo's share of the loan notes were valued at £21.5m on issuance in 2021 and they accrue Pay-in-Kind (PIK) interest at 10%. They do not pay cash interest but only PIK interest. They appear to have a maturity date of 2050 - but would presumably (this is just my supposition) be repaid on any sale of Parmenion.
The PIK interest is shown in the AssetCo Income Statmement as "Other Income" and the outstanding balance of the loan in the balance sheet (both in the consolidated and company accounts) as "Investment in Associates". There is more detail in notes 7 and 24 to the 2023 AssetCo Annual Account.
Therefore while it is true to say that the B shares are entitled to the value of the PIK loans AND the value of Parmenion, I don't think you can ADD the two values together. This is because the PIK loan is a debt of the Shillay Midco and the B shares do not really own 30% of Parmenion but 30% of Shillay Topco. Indeed note 24 to the 2023 Accounts says that the net assets of Shillay Topco at September 2023 were negative £7.6m, while the Parmenion accounts says Parmenion's net assets at December 2023 (a slightly different date) was £42.6m. Presumably the difference between the two is largely made up of the PIK loan.
I do not feel fully comfortable that all the analysis above is correct, as I seem to be clutching at bits of information given in different documents and trying to draw a coherent whole. In particular, I cannot explain why the £21.5m 10% PIK note in 2021
only had a value of £24.6m by Sept 2023. Nor can I understand the restatement of the PIK notes in 2022 given in note 7 of the 2023 Accounts. It seems there that some of the PIK interest was perhaps paid in cash in 2022??? |
Thanks Jane.
Agree with you, still I do not fully see why selling now instead of in two weeks (or indeed instead of 6 months ago). Why would you prefer it?
Actually Parmenion releases a group report (ie P + ebi) on their website in June for the year, then publishes the full accounts in September (and so does ebi).
Agree there is little colour around how the structured interest is valued.
However, it is interesting to notice the latest fund raising at Fundment.
Fundment (a competitor with 500adv firms and 25,000 clients) last month completed a series C raise, valuing the company at "around £250m" (see citywire article on this). Fundment has <1/3 of Parmenion's (ex-ebi) clients and advice firms, and was barely profitable for the year (against the 17.9m or 39% ebitda margin at P). This is to say that it doesn't sound crazy to assume P to be worth at least as much as Fundment (a 3-times smaller, barely profitable, comparable).
£250m means 75m for 30%.
There is a reference to some equity being distributed to Parmenion management in case the sale value will be above certain unspecified amounts. In a recent interview, Mills valued the "fully diluted 25% equity interest" min 50m, to be summed up to the c.28m of 10%-interest PIK loan notes. So this is another bridge to the 75m.
Another thing is that P generates over 10m in free cash flow per annum, so there will be at least 23m of cash sitting in their balance sheet now. This is likely to be added on top of the Ebitda multiple valuation, or a divi.
ebi doubled in size and has been profitable for the last few years, too.
Preservation Capital has an average holding period of 5to7 years, and they are just completing their 4th.
Finally, Asto (or River in a couple of weeks) will provide an updated independent P valuation at the end of the year (and an internal estimate at H1)
As per the other piece of the puzzle, the asset manager, it has between 2.5bn and 3bn aum, generates around 14.5m of revs, costs of 18m per annum to be reduced by 3m and 0.6m (ie should break even in 25). Lets give it an 0.75% AUM valuation, 20-21m. It also has 10m+ of cash (minus the loss for the second part of the year, but will receive 2.7m from Ark in March). Knowles was a remarkable recruit, and River seems also discussing launching ETFs with Ark.
This is to say that I could see a small-medium sized asset manager buying/merging with River at 25-30m (incl cash), with 30m being 20-22p.
I'd be interested if someone could explain me how the PIK loan interest works for B shares, as the RNS states B holders will be entitled to that too. |
@jane
Thanks for this insightful comment, I confess to not knowing previously many of the points that you raise and the rather convoluted holding structure of the B shares is certainly a potential issue.
I am feeling rather less bullish on ASTO now than I was before you posted this.
Thanks again for laying it out like you have. |
I can understand Griffiths (or any outsider) selling here, even ignoring whatever liquidity issues they may be facing. If I understand the situation correctly, holders of the new B shares will be from March holding "tracking" shares in an asset, which currently pays no dividends and holds a 30% stake in a Guernsey company (Shillay Topco) which does not publish publicly available accounts. Shillay Topco then controls (through at least one Guernsey intermediate company, Shillay Midco) a private company, Parmenion, which publishes an annual report 9-months after year-end (so investors' information is 9-21 months out of date depending where we are in the year). Little information is currently published by AssetCo on the current trading at Parmenion and we are warned in the circular that post the split, investors will probably receive no more information than currently because of conditions in the shareholder agreement.
We are told that the 30% stake has been independently valued at £75-90m but this is in a takeover situation and control of when the business is sold will be controlled by Preservation Capital, into which we have no insight. Also the assumptions on which the £75-90m is calculated has not been clarified, nor (as far as I understand, but please correct me if I am wrong) whether this takes account of the dilution for management incentives on a sale.
In addition, to owning an asset whose financial performance of which outside shareholders can only see vaguely and at a significant time-lag, we will hold non-voting shares and the shares will only be "tracking" shares so will not be wholly independent of the overall performance of River Global plc - for example, if that does not have distributable reserves no dividend can be paid and if River Global plc were to go bust...
The fact that the B shares are non-voting shares means that the Takeover Panel rules don't apply so currently large shareholders in the B shares could increase their stakes to gain control without making a bid for minorities. If I understand the rules correctly, because the shares are non-voting, they are also exempt from needing to disclose when large shareholders cross 1% (either up or down) ownership thresholds.
The initial plan announced in June 2024 indicated that the B shares would be delisted (and trade on a Matched Bargain basis) - this would make them ineligible for an ISA and create forced sellers. Now the plan is that they will continue to be listed on AIM (allowing individual shareholders to continue to hold in an ISA - thanks to those on this thread who clarified this point). It is conceivable that in future, the decision might be made to delist the B shares - I presume this would need a 75% vote from B shareholders. The main shareholder (Harwood Capital) has some history in supporting delistings (e.g. SourceBio).
Despite all of this, I am still tempted to buy more based on the hunch that the value in the "somewhat hidden box" significantly exceeds the value the market is giving it. But writing this down makes me realise that the uncertainties are so big that the "discount" to this perceived value will need to be commensurately large to compensate.
DYOR. |
Like so many, he used to have a stellar reputation.
So did Anthony Bolton.
So did Neil Woodford. |
Thanks @SpectoAcc - interesting point. Could be that or else he is disappointed with the split as from my understanding the main shareholders involved in Assetco were pushing for a sale of the stake in Parmenion… I can’t explain it with other motives as if you like Assetco in whole I don’t get how you don’t like it after split as the separation must create at least some value IMO. Parmenion stake must be worth close to the independent valuation the company provided - that valuation is underpinned by Parmenion results if you compare it with peers, it’s not an imaginary valuation… And Global River must be worth something as well: even if loss making there is optionality and could be seen as a cheap leveraged bet on the potential uk market recovery in the next couple of years in my view. Anyway I’m still a bit concerned to be on the other side of Griffiths for the reputation he has… |
@TheIsland - Griffiths was a big investor/fan of Wandisco, forget how many he had but it cratered 90%+.
In its new guise as CRTA, he supported the rescue rights, & subsequently bought more.
The CRTA share price tells you all you need to know about that decision.
Now seems to hold c.17%, largest shareholder, and guess what - it's going to need more money again.
So - speculation only - he's casting around for funds to maintain his stake.
The Welsh wizard - perhaps they call him that for his ability to make money disappear. CRTA is an absolute basket case. |
I didn’t expect him to be the seller as the fundamental story/performance of the company hasn’t changed IMO. Is it possible he didn’t like the reorganization plan? Maybe, as many others, he hoped for a sale of the stake in Parmenion to immediately crystallize its value…
@SpectoAcc, can you elaborate a bit on the potential link with Wandisco situation? I would be interested to know more about it… |
 Haven't kept track of his calls of late, but he did have a good reputation a while back.
Griffiths vs Harwood here - let's see who is right.
So somewhere around 4m (guessing) to go if Griffiths has been the main drag. That was the position on the 18th February.
Since then notable trades of:
1m at 31p
800k at 31p
627k and 550k @ 31.5p
Panmure have been sat well away from the other market makers on the offer and are drip feeding this in, so it might just be Griffiths to clear.
Hopeful?
IF it is, then it is a watch for a few more big blocks. There clearly is continued demand in the market or it would have tanked big from here on those big blocks being sold. So it looks like the market is comfortable with the overhang here and it is just a wait and see on when it gets cleared.
You can still buy an absolute shed load right now so it looks like they will keep grinding it down.
Is it 31p or 30p where they find enough big buyers to clear out the remaining lines of shares?
All that buying and we still have more to go.
Takes so much in this market.
Come on - show us some whoppers!
All imo
DYOR |
Griffiths is the seller, wonder if related to the calamity he suffered at Wandisco (now CRTA).
Gone below 3% today but share price implies more to go. |
@bmcollins do you know what you are talking about? You don’t have to delve that deep into anything… You just have to read the company’s press releases to know that Parmenion makes around 15 m EBIT. If you want to be a bit more advanced you can even find the full accounts on the UK Companies House website. Then you can look at listed peers - there are at least 2 or 3 which seems to be good comparable - and you will find out the current market cap doesn’t even match the potential value of the stake in Parmenion. My personal opinion of course - DYOR… I would really like that someone on this forum tries to make a fundamental well reasoned and informed argument against Assetco because, absent that, I can only see technical reasons for why some market participants would sell at these prices and I’m never comfortable with that assumption as it’s pure speculation… I would be grateful to anyone that would take the time to explain me why one would sell here as I’m not understanding and I’m afraid I perhaps miss something - thanks in advance |
@orinocor
The IC does not have the best record in its tips from my experience of them, but it would be our luck to be 8th out of 8 in the performance table ! |
For information purposes only this is the current share price performance since the release of the Investor Chronicle bargain portfolio 2025
anic +35%
K3 +30%
tavi +20%
crl +13%
crs +7%
vle +5%
carr +4%
asto +0% |
@ohisay
Thx for that, yes the site is impressive, do we know how much money it makes though ?
I looked for that when this reorganisation came up but couldn't find anything definitive, plenty of guesses of its worth from brokers etc but profit seemed to not be shown.
I must go back into ASTO's last report & accounts and delve into them properly to see what they say. |
Yes its disaapointing but one thing I have learnt over the last 20 years is that there are many reasons sellers do what they do.
This is Parmenions website ..they dont exactly seem like small fish to me. |
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