 "Wexboy's" take on things - a great read...
hxxps://wexboy.wordpress.com/2025/02/13/2024-annual-review-out-of-sync/
2024 was (finally) a real inflection/breakout year for Tetragon Financial Group, with investors enjoying a +42% share price gain (& a +4.5% yield). This reflects a +15.4% NAV/share total return – its best in years, again reinforcing its longer-term record of low-volatility 9-10%+ pa net returns – and a narrowing of Tetragon’s NAV discount from 68% to a still astonishing 60%. [Worth highlighting: Even with zero NAV gains/dividends, that relatively small discount compression would have still delivered a +25% shareholder gain!] Crucially, it also helps silence the haters – who were always happy to trot out their usual misconceptions, lies & ancient history here – further improving sentiment, with the stock up an additional +10% YTD & hitting new all-time-highs). And I’d expect further gains ahead, based on anticipated developments this year with some key investments…not to mention a fresh wave of buying IF the shares ultimately trade $19/$20+ a share (per my usual rule – most punters only get interested after a share doubles!).
There were three main NAV drivers last year: The first was Hawke’s Point, which finances high quality mining projects in the Australian (& North American) resource sector – its value grew almost +70%/+$80 million last year, net-net, albeit masking significant (downside) volatility along the way from a peak $320M value as of end-October. [One can hardly complain about the overall net gain!] The second is Ripple Labs A&B Preferred Stock, which gained an astonishing 130%+/$135M+, in the last two months of the year, reflecting its SEC win earlier in the year, the election of Trump & a new crypto-friendly administration in November, and a subsequent four/seven-fold gain in $XRP’s market price. Third, we saw a +25%/+$185M gain in Tetragon’s 75%+ stake in Equitix, received the welcome news in October of an actual sale process (still ongoing today), and confirmation TFG’s stake had increased to 81.5% but would now accrue a tail/profits liability to former Equitix management (for the moment, I’m assuming it still nets back out to an effective 75% stake). All told, less dividends & a measly $25M tender offer – that’s less than 1% of NAV & barely 40%+ of the tender offers in 2023 – those gains in value net out to a near-$350M NAV increase last year.
This year, hopefully we see an actual sale of Equitix – a £1.5 billion price tag has been floated, vs. $14B+ of AUM, reflecting other recent deals & a voracious appetite for alternative/infrastructure asset managers. That price may be a bit rich, but I’d expect an actual deal to still offer significant upside for Tetragon’s 75%+ stake, vs. a year-end $922 million value. [Which would again confirm the (prudent) valuations assigned to TFG Asset Management, which is currently valued at $1.6B vs. $41.2B in AUM (up 50% from $27.4B at end-2019)]. And such a deal could obviously equate to 80%+ of Tetragon’s current market cap – and net debt’s still under 10% of gross assets, so there’s no pressing need to repay any of it – so that’s where the rubber really meets the road:
Either Griffith & Dear flex their control muscles, attempt to reinvest the cash & personally collect the fees on the management contract for another 5/10 years, OR they actually focus on enhancing/realising shareholder value via a massively accretive tender offer for a huge % of Tetragon’s o/s shares.he former was investors’ default assumption to date (& rightly so), but as the principals age out (& want to potentially revalue/realise their own stake), and TFG’s other management/employees lobby re their steadily growing stake, and noting the sheer scale of this potential deal, the odds shift in favour of the latter…clearly it’s still an entirely event-driven scenario, but IF we see a sale & IF we see a massive tender offer, then we’ll also see a step-change in sentiment & the NAV discount. Further, let’s hope we can also add some crypto pixie-dust to the equation – back of the envelope, Tetragon now owns somewhere between 2.25%-2.5% of Ripple Labs, whose private market (equity) value is currently worth something like $14/$15.5 billion today, vs. its actual treasury of 43.3B+ $XRP, which is currently worth something like $107B! That’s a hell of a value gap, one that could potentially be closed/realised via what I’d call an anti-$MSTR strategy, ie (gradually) selling $XRP crypto & buying Ripple equity.
And Ripple Labs has already started down this road – executing two/three tender offers in the last year, funded from $XRP sales – a strategy that could attract a lot more attention & be further refined IF Ripple & Brad Garlinghouse actually propose an IPO, now that Trump’s in the White House. So yeah, it’s definitely a good idea here to do the math & figure out the potential/asymmetric upside for Tetragon on its Ripple Labs stake…vs. its current $1.3B market cap (& a potential/impending sale of Equitix). |
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