You missed the smiley face. :)
I'm all in favour of ITs buying their own shares at 90p when their underlying NAV is 145p. By my calculations, CHRY buying back 15% of their shares at 90p would add roughly 10p to NAV.
But what these slow-and-steady buybacks don't do is substantially narrow the discount. Whether or not it is explicitly stated, narrowing the discount is also a key objective. After all, these buyback shares are being held in treasury instead of cancelled immediately because the CHRY managers would love the share price to get back to a premium, so that they can re-sell the shares into the market.
Even though running a tender might not be as NAV accretive as a standard buyback, those of us trading through nominee accounts end up with a far higher allocation than promised, meaning a transfer of value from other investors to ourselves, which is a more important objective than owning share in an IT that has a higher NAV than before. |
lol clearly don’t understand buybacks.
The buy backs will be done over a period of time, not one swoop. The stock market is generally a means of transferring value from the impatient to the patient.
Reducing shares in issue, when you can buy something valued at around 140p, for a cost of around 90p is good business and should drive up the NAV for remaining patient investors and reduce some selling pressure.
Future potential tailwinds would be news on potential further sales/IPO - Klarna and Starling being the most likely, an improvement in the profitability of WeFox and interest rates falling should all help over time if they materialise.
The Oak Bloke does a good write up on all this. |
Would rather they sit there picking up 200k per day at 89p. |
OK Chrysalis... buybacks don't work. Time to work on a nice, fat tender offer at 110-120p per share once you're ready to draw the £70m facility. :) |
I don't think FTSE250 status per se matters to the stock picking funds - AVI picked up a nice stake for example with CHRY outside of the major indexes.
If anything, FTSE100/250 status might be a proxy for sufficient size and liquidity to get in and out of meaningful positions without unduly moving the share price.
With CHRY in the market daily, I'm not sure a fund could pick up a decent stake in CHRY cheaply. (of course it would be great if somebody wants to try) |
I expect there will be next to no racker buying but many funds will not buy below the 250 so it will now be viable for many more stock pickers |
9 October for joining the FTSE250.
I do wonder how much fund £££ tracks the FTSE250 by buying the actual constituents. But being added to an index certainly isn't a negative... |
Should be a positive too..came out after hours.Chrysalis Investments (UK, BGJYPP4) will be added to the FTSE 250 index and deleted from the FTSE SmallCap index. |
Yes, good reminder that something could still blow up within the CHRY portfolio. I still wouldn't fight against a company wanting to buy back 20% of its market cap though.
They did manage to buy 2 million shares yesterday - including what looks like a 1 million share trade and a 250k trade - at a much higher price than the stock closed at. So perhaps there's a daily cap on the number of shares they'll buy, as I would have expected them to fill their boots on the way back down to 92p... |
Whilst this news is unlikely to have any long-term effect on CHRY, it's a useful reminder that there is rarely such a thing as a one-way bet.
Goldman-backed Starling Bank hit with $38.5 million fine for financial crime prevention failures -
Starling Bank response to FCA Final Notice - |
Second RNS also for about 250k shares.
At this rate - £200-250k per day - it will take months to get the initial £40m out the door, much less the full £100m on its way.
Something might of course happen to the broader economy / stock market - and even then the buyback brokers could pick up more shares on the cheap - but this is the closest thing to a one-way bet I've seen in awhile. |
First 257,462 shares bought yesterday at 91.8p |
Looking forward to the first share buyback RNS to see what kinds of quantity they are managing to hoover up. Yet the share price keeps going up nonetheless... :) |
 27 Sep, 2024 CityWire
Chrysalis to return £40m to shareholders after Visa buys Featurespace
Growth capital fund to start share buybacks after Visa’s purchase of a UK payments protection firm generates an £89m windfall.
Jamie Colvin
comments
Chrysalis Investments (CHRY) is to kick off its eagerly awaited £100m return of capital with a £40m share buyback after Visa’s purchase of Featurespace, the Cambridge-based AI-driven payments protection firm that is the growth capital fund’s fifth biggest holding.
Shares in Chrysalis yesterday rose 3.7% to 90.2p, narrowing their wide gap to net asset value (NAV), after the investment company said it would receive £89m from the sale of Featurespace, which the Visa transaction values at a 20% premium to the fund’s previous valuation.
Visa, the world’s largest payments processor, is reported to have paid £700m ($935m) for the fraud and financial crime management company.
Fund managers Richard Watts and Nick Williamson said Chrysalis had trebled its original £20m investment four years ago in Featurespace, which now accounts for 9% of the portfolio.
Congratulating Featurespace’s chief executive Martina King and founder Dave Excell, Watts and Williamson declared: ‘In many ways, Featurespace has been an exemplar of the type of investment we are looking for and we believe its purchase by a company such as Visa demonstrates recognition of the value that has been accruing from this business model.’
Chrysalis’ liquidity – or access to funds – will jump to £195m, or 38% of net assets, following the sale. It bolstered its cash pile this week with a £70m debt facility with Barclays and also holds £2m of shares in listed payments company Wise (WISE).
With the debt facility covering the £50m ‘buffer’ the company wanted, it can now start to return the £100m it promised shareholders to persuade them to vote for the fund’s continuation in March after a painful share price crash in the previous two years.
The £40m that will initially be used to buy back its depressed shares will effectively pay out to shareholders the cash Chrysalis received from the distressed sale in July of UK chipmaker Graphcore to Japan’s Softbank.
‘As we get more visibility over the closing of the Featurespace process, we hope that this will enable further capital to be returned. We view the company’s shares, which currently trade on a circa 40% discount to NAV, as offering a compelling way to accrete NAV per share to the benefit of long-term shareholders,’ the managers said.
Chrysalis shares launched at 100p in November 2018 and peaked at 271p in September 2021 before crashing to a 53p low last October. While there has been a strong recovery since then, the financial difficulties of online insurer Wefox have weighed on the stock.
Peel Hunt analyst Anthony Leatham said the news was an ‘important milestone’ in Chrysalis’ recovery with the prospect of further capital returns to shareholders. ‘We continue to focus on top holdings Starling, Smart Pension and Klarna as potential future NAV drivers,’ he said. |
Liberum
Featurespace disposal at 20% premium kickstarts buyback programme
Analyst: Joachim Klement
Mkt Cap £537m | Share price 90.2p | Prem/(disc) -37.9% | Div yield 0.0%
Event
Chrysalis has announced that Visa has signed a definitive agreement to acquire Featurespace. Chrysalis expects to receive cash proceeds of c.£89m, receiving an initial £79m up front. Total proceeds represent a 20% premium (c.2.5p uplift) to the latest carrying value as at 30 June 2024. The exit represents a significant return on the fund’s £29.5m investment, realising a 3.0x money multiple return.
Following the recent agreement of a £70m debt facility and upon receipt of the initial consideration, Chrysalis will have a liquidity position of c.£195m, which equates to c.36% of the market cap based on yesterday’s closing price. Given the strong liquidity position and the capital allocation policy approved earlier this year, the company has announced the commencement of an initial £40m buyback programme (c.7.5% of market cap). The initial buyback allocation represents the majority of the initial Graphcore proceeds. Following the Featurespace disposal, the investment advisor expects to be able to announce a further capital return in due course.
As a reminder, under the capital allocation policy, the company has pledged to distribute an initial £100m of cash to shareholders, followed by distributing 25% of net cash profits on future realisations (subject to a £50m cash buffer for prudence).
Panmure Liberum view
This is a very positive announcement for Chrysalis and the shares responded strongly yesterday, gaining 3.7%. The Featurespace proceeds surprised to the upside, with the majority of investors expecting a sale closer to book value. Despite the positive move, CHRY shares continue to trade on a near 40% discount to our pro-forma NAV estimate. We believe this represents excellent value, given the line of sight over significant capital returns over the next 12 months. With the new RCF and the pending Featurespace proceeds, the company has more than enough liquidity to deploy the full £100m of buybacks outlined in the capital allocation policy. This would represent nearly 19% of the current market cap being returned to shareholders. Whilst we expect the buyback programme to have a positive impact on the price, for illustrative purposes, if the full £100m was executed at yesterday’s closing price, the NAV accretion would be c.8.6%.
Whilst concerns remain over the wefox situation, the position was only 7% of NAV at 30 June. Chrysalis and other shareholders have continued to support the company in order to realise maximum value for their investment, but we believe the market is placing too much emphasis on this negative situation. Klarna and Starling continue to perform very strongly, and both have mooted public listings in the medium term (with Klarna a potential 2025 IPO candidate). The surprise to the upside on yesterday’s Featurespace sale is further demonstration of the latent potential in the portfolio, in our view. The same can be said of the Graphcore disposal, which realised significant value, despite the market effectively writing it down to zero at one stage. With significant capital being returned in the near term, and further material realisations on the horizon, we think the shares represent very good value at these levels and we maintain our BUY rating. |
ZeusCompanies | 27 September 2024Realisations and share buybacksChrysalis Investments has announced the sale of one of its portfolio assets that is expected to bring in initial proceeds of £79m. When combined with existing cash, liquid assets and the £70m credit facility announced earlier this week, Chrysalis will have significant liquidity (c. £195m). This has allowed the company to announce a £40m share buyback, which we think should help close the c. 38% discount to the last reported NAV per share of 145.25p. In our view, the disposal of Featurespace highlights that Chrysalis has invested in some high quality assets, notwithstanding certain failures such as wefox and Tactus, and that the current discount to NAV is unjustified.? Disposal of Featurespace: Yesterday Chrysalis announced that Visa has acquired Featurespace, Chrysalis' portfolio asset that sells financial crime risk management software. Featurespace had a carrying value of £74.2m on 30 June 2024 for CHRY, making it the company's fifth largest holding (8.6% of the portfolio). The deal is expected to result in gross proceeds for Chrysalis of £89m, a c. 20% uplift to the latest carrying value, which represents a money multiple return of 3.0x since the initial investment in May 2020 and subsequent follow-on investments. Initial consideration (i.e. before the deferred elements), is expected to be c. £79m, which is a sizable injection of liquidity for Chrysalis.? Share buyback: Chrysalis has previously announced that once it has a liquidity buffer above £50m it will consider making share buybacks to narrow the NAV discount. With the £42.8m proceeds from the Graphcore disposal, other cash on hand, its £2m investment in Wise plc, the £70m debt facility (announced this week) and the £79m initial consideration from Featurespace, liquidity will be c. £195m. With this liquidity, Chrysalis has announced a new £40m share buyback, which is c. 7.5% of the market cap at last night's close. This should help reduce the c. 38% discount to last reported NAV per share. The company has approvals to return up to £100m to shareholders in total, so we expect further share buyback announcements over the coming months.? wefox: At the most recent NAV update (29 July), NAV per share decreased by 1.5% to 145.25p. The largest move was the 52.2% write-down in wefox from £126.5m at 31 March to £60.5m at 30 June. According to Chrysalis, wefox was written down further due to applying lower valuation multiples to the investment's revenues and applying a discount due to the uncertainty of the ongoing viability of the company. Our view is that even if this investment is written down entirely, there is still significant value in the remainder of the portfolio.? Investment view: Our 30 January initiation note, when shares traded at 78.8p, argued that there was significant underappreciated value in Chrysalis' portfolio and the c. 45% discount to reported NAV was unwarranted. The recent realisations of Graphcore and Featurespace, at premiums to carrying value, helped to demonstrate this, albeit with the shine taken off by write downs elsewhere. We believe there remains significant value in Chrysalis' other investments, most notably Klarna AB and Starling Bank. Klarna reported a strong set of H1 results in August, growing revenue in H1 2024 by 27%, gross profit by 22%, reporting positive adjusted EBIT, and reducing net losses by 84% to SEK333m (£25m). Klarna is Chrysalis' third largest portfolio holding, valued at £100m on 30 June 2024. Articles have mentioned a possible IPO value for Klarna of $15bn-20bn, which we think is supported by the EV/Gross profit multiples of Affirm, a US-listed peer. At this value, Chrysalis' 1% stake would be worth £113m-£152m. Compared to the last reported carrying value, lifting Klarna's value to the upper end of this range (£152m) would add c. 6% to CHRY's total NAV per share. If and when the IPO happens, this would be another significant injection of liquidity which could be deployed via share buybacks or into new investments. We see further share price upside from here as the discount to NAV narrows. |
Surprised too. But as they can only buy within 105% of the 5 day moving average (or similar), around this point is a great area to stock up. Much lower and the buybacks will kick in, but there are a few days where the threshold is going to maybe be 88p |
Bit of a suprising late pullback.
I can understand profit takers. (maybe somebody needs to make their numbers before the close of Q3 on Monday) But I can't quite understand selling in advance of £100m of buy orders coming into the market over the next few weeks and months.
I'll have to reflect overnight whether to add a little bit more on top at 90p. CHRY buying back at 90p is more NAV accretive than buying back at 95 or 100, so it's fine by me if people want to sell into that... |
I imagine there's a few stale holders who'll sell into any rise. Good for CHRY's ability to undertake the buyback at a reasonable price. |
Wow The expected gross proceeds of £89 million..more than expected..great news. |
Buying now looks a no brainer to me |
The Company has engaged its joint corporate brokers, Deutsche Numis and Panmure Liberum (the "Brokers"), to implement the share buyback programme on its behalf over time. The maximum price payable for a share will be an amount equal to the higher of:
· 105 per cent. of the average market value of the Company's shares for the five business days immediately preceding the day on which such share is contracted to be purchased; and
· the higher of the price of the last independent trade and the highest current independent bid on the LSE.
The 105% part looks to me like carte blanche to hoover up shares in a week or two, once yesterday's price falls out of the 5-day period...
That RNS from yesterday re. the debt facility is going to make a nice little extra profit. :) |
Featurespace confirmed sale, buyback launched with further buyback on completion of Featurespace sale. Let the rerate begin. With klarna on the horizon we should be back over 1.00 IMO narrowing the discount to the mid 30's |
hTTps://portfolio-adviser.com/chrysalis-preps-for-100-share-buyback-with-new-loan/ |
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