Vpc Specialty Lending In... Share Discussion Threads

[redtom1] 30/10/2021 12:29

At close (4:30) yesterday, the NAV was around 129p and the share price around 95p, a discount of 26%. But the NAV went up by another 12p per share between 4:30 and the US close at 9pm. Bakkt went from $28 at 4:30pm to close at $42.5. Again this highlights the crazy volatility that we are facing.
So if the NAV is up 10p+ since close on Friday, at what price will VPC open on Monday? Around 100p is my guess. I wish they could realize this value now rather than in a year's time.

[2wild] 29/10/2021 22:11

BKKT now up 72% at USD44 in after-hours trading. With over half a million trade so far today, this is a very liquid stock so don't see why any need to discount by twenty or thirty percent.

[waterloo01] 29/10/2021 21:57

Indeed it does. As it has done since it was yielded 12%. And under 50p. Seemed to have handled it reasonably well but bakkt adds a new layer. Interesting times

[redtom1] 29/10/2021 20:36

Bakkt is going to make VPC very interesting and extremely volatile.
A couple of minute ago the share price was $38.2.
This adds 26p to NAV over and above the 110.9p announced earlier today as at 30 Sept. So we are in the ballpark of 137p, a discount of 31% based on 95p share price If this holds until closing, I think we will see a modest rise on Monday. But this volatility is crazy and very difficult for VPC shareholders to evaluate.

[redtom1] 29/10/2021 16:59

Thanks redhill9.
I can envisage the arbitrage crowd looking at this closely. If you bought £10000 worth now when the discount is 26% then potentially you will have £10878 in 18 months time (ie one quarter's worth is at NAV) on top of 8.5% dividends (assuming that everything else remained the same). Interesting.

[skinny] 29/10/2021 15:49

Interesting posts - thanks.

[redhill9] 29/10/2021 15:39

redtom1, that was the point. The BOD agreed to this and, from memory, some other targets after coming under pressure regarding continuance - this potential commitment to offer a significant tender was a means of (partially) placating dissenting shareholders who weren't impressed with the size of the discount and/or the slow growth in the share price

Things have moved on a bit since then, not least with an evolving business model.

[redtom1] 29/10/2021 14:44

Thanks rambutan2.
That makes it an interesting financial consideration when we start to get towards 2023 and there is still a large discount. Knowing that you can uplift a quarter of your holding will create demand in itself leading up to it given the arbitrage opportunity.

[rambutan2] 29/10/2021 14:37

redtom1, it means they would offer shareholders a 25% tender at nav less costs or thereabouts.

[chucko1] 29/10/2021 14:04

If in 2023, they would have been able to recognise the full value of the current large SPAC/BKKT merger. In which case the discount would likely be far narrower whatever price they eventually got. However, they might still have other SPAC investments. It hardly seems a business they would shy away from given their ability to target good investments.

Alternatively, they could increase the 30% discount to something higher still. They could pay special dividends whenever they were able to realise value.

There are many other things they could do, and if that involves hedging, this could have a significant effect on the discount (of VSL).

[redtom1] 29/10/2021 13:09

Just found this regarding the discount.
'If the average discount to NAV at which the shares trade over the 3 month period ending on 31 March 2023 is greater than 5%, the Board will now offer shareholders an exit opportunity for up to 25% of the shares in issue immediately following the Company's AGM in 2023.'
I'm not quite sure what this means? What value is this 'exit opportunity'?

[redhill9] 29/10/2021 12:53

Worth reminding ourselves that at the time of the continuance vote one of the things the BOD committed to was to reduce the discount. However, this was before they got involved with SPACs and I have to agree that, now they're in an even more volatile trading environment than last year, I'm not sure how they can easily do that. I suppose they're response would be that, discount notwithstanding, they have overseen a significant increase in the share price since the vote.

[scrwal] 29/10/2021 12:45

The discount is unavoidable. Not sure how the company can narrow it since it is dealing with a volatile share at the moment.

All we can hope for is that the BKKT price is at least at the current level when the holding could be sold. Until then expect fun and games with the VSL discount and share price.

[redtom1] 29/10/2021 11:37

So based on today's NAV notification, the NAV at end of Sept is 110.9p but the BAKKT deal adds a further 15.7p taking it to 126.6p other things being equal. This is based on a closing bakkt share price of $25.61. Therefore the shares at 95p are on a 25% discount to NAV which is probably a bit on the high side. I would expect the company to try to narrow this discount if it continues.

[redtom1] 28/10/2021 12:29

I think Liberum are being a little cheeky using a 20% discount when VSL has stated that it uses a 30% discount. But I can arrive at Liberum's 17% using my financial model.
So 2.22m shares at closing of $29.4 = $65.3m. At 80% this = $52.2m. Translated to GBP = £38.1m. It is already in the books at $15.5m (£11.3m) so uplift is £26.8m which is 9.6p per share.
There are 2.697m warrants and using Black Scholes method these are valued at $48.3m discounted by 20% to $38.6m (£28.1m). In the books at $5.9m (£4.3m) so gain of £23.8m which is 8.6p per share.
So total gain is 18.2p (9.6 + 8.6). Previous NAV was 108.5p so an increase of 18.2p equates roughly to 17%.

[ctrader3] 28/10/2021 11:41

According to analysts at Liberum this event translates through to “a NAV increase of c.17% for VSL based on the latest share price for Bakkt and assuming a c.20% discount to account for the lock-up period”. I suspect we might hear more good news about the fintech portfolio at VPC, thus making that discount look a tad anomalous, especially given the 8.8% yield.

David Stevenson

[corbeta] 28/10/2021 11:22

By chance the trade you show for 94.0216 above is generally
being shown as a sell, whereas, in fact it is my top-up
and therefore a buy.

[ctrader3] 28/10/2021 10:24

JEFF wants your shares, most probably to replace shares sold higher up.
the 100k which was the roadblock on the 26th still exists.

[redtom1] 27/10/2021 11:49

I've looked at Black Scholes method and I potentially come up with about 7.5p uplift for the warrants. But there are lots of variables (eg volatility) that one has to guess at. This would take the total uplift to 13p which is a lot more than the share price rise! Interesting times ahead.

[redtom1] 27/10/2021 11:26

I've crunched the numbers and I come up with an increase in NAV of 10.1p based on BKKT share price of $23.78, an exchange rate of 1.3723 and both shares & warrants discounted by 30% (as VSL does). The biggest variance is my value of warrants verses the proper (ie complicated) method adopted by VSL. Mine is a conservative method so real value will be higher. Given share price only went up 7/8p, this deal has actually increased the discount.

[rambutan2] 27/10/2021 10:36

Continued sour grapes from the Stifel guys, who have never got their heads round VSL Imho

[davebowler] 27/10/2021 10:05

Stifel view: This announcement from VPC is best described as cryptic and not particularly helpful in
explaining the impact of the share price move in Bakkt on the VPC NAV. We think greater clarity in the
announcement such as the impact on the NAV per share would be more helpful. We think it is little
wonder that VPC shares trade on a relatively high discount, when the communication with the market is
so poor. We are awaiting clarification from the company on the valuation of Bakkt. The common stock of
Bakkt was valued by VPC at a 30% discount to the closing price of $9.99 in the preparation of the last
published NAV of 108.7p at 31/08/21. At the close of business on Monday, the Bakkt share price
jumped to $30.60 following the announcement of a tie up with Mastercard on cryptocurrencies.
However, yesterday the shares closed down -22.3% at $23.78. If we value VPC’s 2.2m shares in Bakkt
on a 30% discount to yesterday’s closing price i.e. $16.65, then VPC’s holding is valued at $36.6m, a
gain of $21.1m (£15.3m) over the valuation at 31/08/21. This gain is equivalent to +5.6p per VPC share.
In addition, VPC owns 2.7m private placement warrants. These appear to be ‘in the money’ given the
strike price of $11.50 and potentially there will be a substantial gain when these are revalued. However,
we seek further clarity from VPC given the potential complexities of the warrants. VPC closed at 95p
yesterday, a discount of 13% to the August NAV, prior to any gain from the Bakkt investment. (Analysts:
Iain Scouller/Sachin Saggar)
Bakkt investment: On 15/10/21 Bakkt Holdings, the digital asset marketplace, announced that it
completed the previously announced business combination with VPC Impact Acquisition Holdings. VPC
Specialty owns 2,220,530 Class B Shares and 2,697,467 private placement warrants, with a cost basis
of US$2,713,994 in Bakkt.
Valuation: As disclosed in the June newsletter, these Bakkt shares are valued at the closing price as of
the valuation date, with a discount applied through the post-close lock up period. As at 31/08/21, VPC
valued the common stock at US$15,528,166, a 30% discount to the closing price of US$9.99. The Class
A Common Stock shall be subject to a one-year post-closing lockup unless otherwise accelerated based
on average trading performance measured six months post-closing.
Warrants: The private placement warrants continued to be valued using an option pricing model. As at
31/08/21, VPC valued the private placement warrants at US$5,902,096.