Vpc Specialty Lending In... Share Discussion Threads

[chucko1] 12/1/2021 09:53

Yes, the warrants will have considerable time value. If $15 for the underlying share price is correct, then a 5 yr warrant has additional time value of about $4.8 resulting in a total of about $8.3. What matters a lot here is the volatility at which such a warrant is priced and I have assumed a lofty 60%. Bear in mind that it is 41% for short dated AAPL options and 32% for MSFT. That said, for a SPAC, you may as well stick your finger in the wind as there will be limited ability to risk manage such a thing.

I still do not see Stifel's 14p a share - in fact I am not sure the analyst has much idea. Furthermore, I do not think the market shares this optimism - it has now had a full trading day to take the price higher by a portion of the 14p and the initial 1p and then 3.5p suggests few others see 14p as the true increase in NAV.

The clue to Stifel's "greenness" is the comment "put pressure on the income paying ability of the fund" Nonsense - they are not changing anything, although at a higher NAV, the dividend yield would fall upon the increase in share price. In aggregate, they will still pay out the income their current investments generate.

Odd.

[irishmatt] 12/1/2021 09:26

$ not p sorry

[irishmatt] 12/1/2021 09:26

Enterprise value is 10p but share price is 15p which puts the warrants in the money too. I've not done the calc but that would be where it's coming out higher

[spectoacc] 12/1/2021 09:21

OK, how do they get to +14p?

[davebowler] 12/1/2021 09:07

Stifel;

VPC Speciality Lending - 15% gain following announcement of SPAC deal
Stifel View: We have commented earlier on the beneficial economics for VPC sponsoring
a SPAC (Special Purpose Acquisiton Co.) (link here) and this has been borne out with an
estimated positive impact of +15% or +14p (based on the 30/11/20 NAV of 94p) to VSL
shareholders based on the closing price of $15 for VIH (the SPAC). We expect the bulk
of these returns to flow through in January as the deal is expected to close shortly. The
underlying company, Bakkt, is also interesting as it focuses on digital payments including
cryptocurrencies, providing a platform for users to convert one digital asset to another e.g.
a giftcard for air miles. Given the large gain we expect greater volatility in the NAV of VSL
and put pressure on the income paying ability of the fund. However, it is a good headache
to have and we retain our Positive rating as the fund is trading at a 22% discount to the
prospective NAV of c.108p. (Analyst: Sachin Saggar).
Merger: VPC Impact Acquisition Holdings, a special purpose acquisition company
sponsored by VPC Impact Acquisition Holdings Sponsor, LLC, an affiliate of Victory
Park Capital, has entered into a definitive agreement to combine with Bakkt Holdings.
Bakkt is a company launched by Intercontinental Exchange, Inc. in 2018. Through
VPC Sponsor, VPC Specialty Lending Investments currently owns 2,220,530 Class B
Shares and 2,697,467 private placement warrants in VIH, held at an aggregate cost basis
of $2,713,994.
Valuation impact: The transaction implies a $2.1bn post-merger enterprise value at a
$10.00 price per Class A Common Stock. Upon the consummation of the transaction,
VSL's Class B Shares shall be automatically converted into one share of Class A
Common Stock of Bakkt with an aggregate implied transaction value of $22,205,300 to
the Company.
Warrants: Similarly, each private placement warrant shall be converted into a warrant to
purchase one share of Class A Common Stock of Bakkt. VSL holds 2,697,467 warrants,
which maintain a $11.50 per share strike price, provide for cashless exercise and expire
five years after closing of the transaction.
Lock-up: VSL's Class A Common Stock and warrants shall be subject to a one-year
post-closing lockup unless otherwise accelerated based on average trading performance
measured six months post-closing. The transaction is expected to close in the second
quarter of 2021 and remains subject to VIH shareholder approval amongst other closing
conditions.

[chucko1] 11/1/2021 18:04

This issue with BSI has been considered here before. I am not aware of any dissent from the view that BSI simply are not fit for purpose.

The still owe me some REIT dividends from over 2 years ago. The move from Barclays Stockbrokers to BSI brings shame on the management of Barclays PLC. The FSA could not give a hoot (what is new there?).

[colonel a] 11/1/2021 16:57

waterloo01,
Have Barclays given any justification for no longer permitting purchases ?
I have a Barclays account but have been unable to get an explanation.

[chucko1] 11/1/2021 16:25

Thanks for that.

In terms of whether the market was asleep as I thought was a possibility - seems it was. You can easily sell 50k shares (at above bid) but would need to pay 86p (1p over offer) to buy the same amount.

[gco1133a] 11/1/2021 15:57

Cashless exercise means if the warrants are executed they don't physically pay over the cash but get fewer shares, so if you had 2 warrants with a strike of 10 and a share price 20 you would get one share of 20 rather than pay over 20 and get two shares at 20. The net financial effect for the warrant holder is nothing.

[chucko1] 11/1/2021 15:13

Ha - market caught up. Now 84-86.

[oniabsta] 11/1/2021 14:15

Had to have a small top up

[chucko1] 11/1/2021 14:06

I am asking myself what VSL is doing with an investment that appears to have grown 10-fold (from $2.7mn cost to $22.2mn)!! Well, it's to do with their lending to FinTech with certain . occasional equity participations. They got a good one here, it would appear, with Bakkt being a platform for digital assets.

I just see a circa $20mn uplift upon closure, as I am sure you all do. The warrants could add to this depending upon valuation technique.

The language in the first paragraph of the announcement is a little loose, but I will look at anything else I can find. I have never, ever heard of the term "cashless exercise". Cash-settled or physically-settled, yes. Or cashless implying a strike price of near-zero, but the stated strike is $11.50. Maybe I'm just getting old.

That said, $20mn is around 6pps on the NAV. Shares up 1p. Does that gap represent deal and pricing risk on what is likely to be a recent highly increased equity value? Or an asleep market, or the fact that VSL itself has risen markedly the past days and weeks.

[wskill] 11/1/2021 13:49

VSL seems to do very well with its equity holdings,another winner from our management team well done guys looking like a increase in net asset value is on the way.
Will this take it back over £1 I wonder.

Very happy with my investment in vsl yield is excellent and capital appreciation as well.

[spectoacc] 11/1/2021 13:10

@chucko1, you're good explaining these:


"VPC Specialty Lending Investments PLC (the "Company")

Update Regarding its Holding in VPC Impact Acquisition Holdings Sponsor, LLC



The Company notes that earlier today, 11 January 2021, VPC Impact Acquisition Holdings (NASDAQ: "VIH"), a special purpose acquisition company sponsored by VPC Impact Acquisition Holdings Sponsor, LLC ("VPC Sponsor"), an affiliate of Victory Park Capital ("VPC"), announced it had entered into a definitive agreement to combine with Bakkt Holdings, LLC ("Bakkt"), a company launched by Intercontinental Exchange, Inc. in 2018. Through VPC Sponsor, VPC Specialty Lending Investments PLC ("VSL") currently owns 2,220,530 Class B Shares and 2,697,467 private placement warrants in VIH, held at an aggregate cost basis of $2,713,994.

The transaction implies a $2.1 billion post-merger enterprise value at a $10.00 price per Class A Common Stock. Upon the consummation of the transaction, VSL's Class B Shares shall be automatically converted into one share of Class A Common Stock of Bakkt with an aggregate implied transaction value of $22,205,300 to the Company. Similarly, each private placement warrant shall be converted into a warrant to purchase one share of Class A Common Stock of Bakkt. VSL holds 2,697,467 warrants, which maintain a $11.50 per share strike price, provide for cashless exercise and expire five years after closing of the transaction. VSL's Class A Common Stock and warrants shall be subject to a one-year post-closing lockup unless otherwise accelerated based on average trading performance measured six months post-closing. The transaction is expected to close in the second quarter of 2021 and remains subject to VIH shareholder approval amongst other closing conditions.

[chucko1] 08/1/2021 23:06

I am selling about 3% of my holding per 2% price rise (so about 1.5p). So at 95p (around NAV flat), I will have about 60% of my initial position remaining. That 60% is still a little more than I held in March 2020 and I am more bullish because they have now shown they can manage a poor situation well. Further, they have been able to increase the quality of the portfolio, so I see a good run ahead for this especially as compared with many alternatives.

I do not think this goes too high, though - there will be a consistent view of this as a low-quality lender. Understanding the structure will be secondary, although it ought not be.

[eeza] 08/1/2021 20:20

12mths round trip.

[badtime] 08/1/2021 19:59

Nudged over 80 which is nice

[skinny] 04/1/2021 13:12

I hold the all of the first 3 that you mention - but none of the second 3 :-)

[chucko1] 04/1/2021 13:07

Well BBOX and WHR have hardly disappointed! I also think there remains tremendous value in certain REITs which are not yet more than 50% recovered. AEWU, AIRE and SREI immediately come to mind. And with low interest rates for the foreseeable, some of the infrastructure REITs are inexpensive especially if a national/global recovery is in the offing in Q3 onwards.

Of course, we could all have simply bought AAPL, TSLA and BTC and gone on a long holiday instead of managing risk. But then I remembered - no holidays to go on.

[skinny] 04/1/2021 12:59

Chucko1 - agreed.

Unfortunately, it was one of those that I didn't add to in March/April, concentrating then on my REITS - BBOX, WHR etc.

Anyway, more than happy to hold here.

[chucko1] 04/1/2021 12:53

Skinny, if you add in the exceptional dividend returns, you are in the money. Especially good compared with many, many other things.

Seems set to continue (although not at the very rapid pace of the last 2-3 months). I think it wise to be deleveraged and de-risked going into what may be a really nasty 2-4 months re. virus.

It's still really cheap, long term.

[wskill] 04/1/2021 11:42

Happy new year Dave thanks for the updates, more than happy with vsl a return of over 10% a year in dividends alone will do me.

[skinny] 04/1/2021 11:37

Thanks Dave - my ill timed purchase from last January is finally almost in the money.