Good observation Spec. Have to agree that, after all the issues they've had, buying off Jupiter smells pretty rotten.
However, a dissenting view could be:
- Other institutions holding also bought from Jupiter
- CHRY's holding has increased from 12% to 15%. A 3% increase in exposure doesn't merit a 14% fall in sp
- Starling is actually doing very well!
- Growing discount to NAV represents v good opportunity |
CHRY buying £20m more Starling off trust manager Jupiter is absolutely scandalous IMO.
And they're deliberately paying a price that gives them a small uplift to the NAV - of course they are!
So now Starling will be c.15% of CHRY, and CHRY will be down to a few tens of millions of liquidity. What happens when there's fundraisings at other holdings?
Just when you thought the Jupiter scandal couldn't get any worse/had largely blown over.
So I suspect that's why GROW has legs, and CHRY are chopped off at theirs.
Would be interested in any dissenting views. |
Large divergence here between CHRY (down 14% over last month) and GROW (flat over last month). Any thoughts on why? |
Given up waiting for the tip and have sold the remainder - best of luck to holders. usually a good sign when there's no posts on a BB for a month. |
Hoping for some scribe/hack to give CHRY a "Tip for 2023" - is the sort of rubbish they like to tip. Remain a holder. |
I think 100p very realistic as the momentum trend continues NRI |
Nice quarterly breakout. |
Agreed, tho not before time. What a scandal it's been. JUP should hang their heads in shame. |
 This a good update for sure. Starting to cost average now, well underwater on this.
GLA
Update on Performance Fee Arrangements
As previously notified to shareholders, the Board of Chrysalis and Jupiter have been engaged in discussions to revise the current performance fee arrangements in order to ensure long-term alignment between the management team and Chrysalis shareholder interests.
An agreement in principle has now been reached on revisions to the performance fee. In summary, these are:
-- Overall performance fee level reduced from 20% to 12.5% of the amount by which the adjusted net asset value exceeds the higher of the high-water mark and the hurdle rate
-- Performance fee to be satisfied in shares (excluding tax and other liabilities attributable to receipt of the performance fee which will be satisfied in cash), with a deemed issue price set at the higher of NAV and share price as at the year-end in respect of which the fee accrues
-- The shares allotted under the performance fee will be allocated by Jupiter solely to the members of the management team to ensure alignment of the team with Chrysalis shareholders
-- Current "high-water mark" set in September 2021 is maintained at the same level
-- Introduction of a deferred settlement structure; 25% of the shares due in any performance fee payment will be immediately issued with the remaining 75% of payment deferred by Chrysalis for between 3 and 5 years, subject to share price tests
-- A cap on the performance fee payable in any one year based on the performance fee payment not resulting in the Company's total expense ratio (TER) exceeding 3.75% in that year
Further details will be provided to shareholders in due course through a circular where shareholder consent will be sought by virtue of these changes being a related party transaction for the purposes of the Listing Rules. If approved by shareholders, it is expected that the revised arrangements will apply with effect from the start of the Company's current financial year. |
Trading Update
Net Asset Value
The Company announces that as at 30 September 2022 the unaudited net asset value ("NAV") per ordinary share was 147.79 pence.
The above NAV calculation is based on the Company's issued share capital as at 30 September 2022 of 595,150,414 ordinary shares of no par value.
September's NAV represents a 15.69 pence (9.6%) decrease since 30 June 2022 and a 41% decline over the Company's financial year to 30 September 2022.
Key highlights
Key drivers of the Q4 NAV performance were:
-- Following the successful completion of primary funding rounds, and the more resilient performances of listed peers' share prices , Deep Instinct and Featurespace were marked up
-- Starling, Graphcore and InfoSum were marked down following a derating of their relevant listed peers
-- The Company's largest holdings continued to make excellent progress and trade well against a challenging backdrop, during the quarter to September. Revenue growth across the portfolio was strong over the financial year and is projected to be 53% on a weighted average one-year forward basis
-- NAV decline of 41% over the financial year to 30 September 2022, predominantly driven by the down-round undertaken by Klarna versus a 27% decline in NASDAQ and a 62% decline in the GS Non-Profitable Tech Index
-- Private assets contributed to a 71.86 pence decline in the NAV per share over the financial period to 30 September 2022 with listed assets contributing to a 31.90 pence decline. The NAV per share captures a weighted average mark down of individual assets' peak valuations of approximately 50% . Protection mechanisms extant in certain assets have limited the impact of these mark downs on the NAV per share
-- Five portfolio companies have raised a total of approximately $1.5bn over the calendar year to date. Despite extremely difficult funding markets, portfolio companies have continued to attract significant investment, including from new holders. The Investment Adviser believes this demonstrates the strength of the underlying investment cases. Of these five rounds, only that of Klarna was undertaken at a level below its prevailing carrying value, this having been written down by approximately 35% before the down-round. Chrysalis contributed $45m of primary capital to Starling Bank, Klarna, Featurespace and Deep Instinct, representing just 3% of total capital raised. The late-stage nature of the majority of the portfolio, and thus typically diverse shareholder lists, enables the Investment Adviser to be efficient in the allocation of capital
-- Chrysalis has a robust balance sheet. As at 17 November, the Company held approximately GBP67m in cash and also had a GBP 13m position in Wise, resulting in total liquid assets of GBP 80m
-- The portfolio is well funded, with 35% of the portfolio now profitable; 32% funded through to profitability based on company budgets; and a further 14% with a cash runway of approximately two years. This represents a substantial improvement from our previous update. On this basis, the Investment Advisor believes the foreseeable, likely future funding requirement across the portfolio is approximately GBP20m
Investment Adviser Comments
Richard Watts and Nick Williamson (co-portfolio managers) comment:
'We are very encouraged that in an extremely challenging market, five of our largest holdings have raised $1.5 billion in aggregate over the calendar year to date, with some welcoming new high-quality investors onto their share registers. We believe this demonstrates the ongoing strong performance of these assets and their compelling investment cases. Furthermore, the robustness of our valuation methodology is demonstrated by the fact that four of the five funding rounds were completed above the prevailing carrying value in Chrysalis.
The macroeconomic and geopolitical backdrop is uncertain, but we remain confident that many of our assets will continue to disrupt the huge markets in which they operate; our top six holdings have a sub 1% market share of their aggregate total addressable markets. In our experience, disruptive companies generally compound strong rates of growth throughout the economic cycle, and we believe this will be reflected in our NAV over time. Wise is a very good example of this, with analysts currently forecasting that the company will generate the same rapid rate of revenue growth through 2022 as when Chrysalis first invested in it four years ago.
Many of our largest holdings have evolved into market leaders since the point of investment, and we are confident in the outlook for these companies. The investment team has had a particular focus on working with portfolio assets over the course of 2022 to ensure that they are appropriately balancing growth and profitability considerations and are sufficiently capitalised to deliver on their plans. This should translate into successful exits and strong returns for our shareholders over the medium term.
Chrysalis has a portfolio approach to diversification to mitigate stock specific risk, and this has been borne out by the current macroeconomic backdrop, which has affected different assets in different ways. For example, our consumer exposure has seen a negative impact from inflationary pressures, which in turn have triggered a rising interest rate environment, to the benefit of some of our financial exposure.
Our original premise when Chrysalis was launched was that, while not all investments would be outright winners, a diversified portfolio would withstand market shocks and the most successful investments would offer the potential for multiple returns on invested capital, ensuring an attractive overall return for investors. We believe this premise still has validity." |
Read well I thought, albeit these things are designed to. At some stage, the NAV will stop falling (not calling it just yet!). |
Im in. Eventually this should catch up with the rally. |
Disappointing when eg GROW has been on a tear.
But even big US tech is disappointing now. |
Hmm that is an impressive drop today.Behaving more like a maggot than a chrysalis at the moment. |
Unquoteds (and illiquids) just don't work in OEICS, despite the best protestations of the sales teams and managers. The sporadic gating of property OEICS and a well Known big income fund were the canaries in the mineIs the next scandal the aim iht portfolios where retirees were tempted into (sometimes illiquid) aim stocks at the top of the valuation cycle? |
Absolutely no sign of a bottom yet. |
as well as mid cap open ended fund where they are pushing regulatory limits. sound familiar?!! |
what a mess this is. i suspect jupiter will be sellling starling stake in chyr too.... |
On Starling I think, not CHRY? FT talking a 40% drop in Starling's value. |
jupiter set to sell starling at a steep discount according to ft |
Glad to hear @Archy147 - that Telegraph tip a few weeks ago was one of the worst I've ever seen. Wonder how all those buyers are feeling now. Ready to sell again I bet.
Which will probably be the time to buy. |
Well thankfully i actually bottled this yesterday before todays decline
So it goes back on the watchlist for now.. |
Thanks for the detailed response spec, always interesting to hear well reasoned thoughts.
I must admit, coming in here does feel like trying to catch the proverbial falling knife. I also distrust the relationship between JUP and CHRY, which frankly stinks to high heaven.
Interestingly, the 5 year charts for GROW and CHRY do look nearly identical. The only difference is CHRY has taken the bigger hit. This is rightly so given the shenanigans over the bonuses, but the contrarian in me says that also means they could be due the bigger rebound, when it comes.
I'm normally a value investor rather than speculative/growth. This has attributes of both though so I will (nervously) hold. Also looking closely at GROW now thanks for flagging. |
I want to agree :)
Opportunity cost relevant too - eg a "proper" p/e co like HVPE, currently available at a 45% discount. Or for much nearer to CHRY, how about GROW - last NAV 937p, available at 375p.
All likely due further downgrades to NAV of course.
CHRY has the major disadvantage of coming with baggage - more than you could squeeze on to a Ryanair flight - as well as having very little control over its holdings (unlike HVPE in particular, but unlike GROW too).
The comedy performance fee paid to Jupiter before Klarna dived is in the past, but what isn't in the past is the web of JUP involvement, splits-style, where Jupiter own a large chunk of CHRY, take fees for managing, hold it in other JUP funds, have co-investments in common. That's a worry others don't have.
What if JUP became forced sellers? What of conflicts of interest? We saw which way that went where the performance fee was involved.
Overall, I just don't rate the co's they're invested in, nor the values they're held at. Is that sufficiently in the discount? I'd have said yes, in most markets, but doubt it is when there's alternatives like HVPE & GROW (& many more - the lamentable SUPP 17p vs 35p NAV; the decent IPO 75p vs 136p NAV; the excellent NBPE 1620p vs 2341p NAV. Plus MERC, OCI, APEO..).
Currently only hold one of the above btw, in small size, as I fear everything's going lower. But in any big bear market there's always vicious bounces, so good luck. Cheaper now than they were at least. |
lol i don't disagree this could yet go a chunk lower.
In reality its incredibly hard to ever call the bottom on these things.
I just look at the share price being lower now than it was at the bottom of the Covid nadir and figure prospects can't seriously be worse now than early days of the pandemic when no-one had any idea how long the world would be crippled for....
Its a risky one for sure, but believe the risk/reward ratio is decent at this level |
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