Woodford Patient Capital Share Discussion Threads

[jonwig] 30/9/2019 12:54

Moneyweek's take on WPCT and Woodfinger:



Covers familiar ground, but also suggests the board are having difficulty dislodging him and finding a replacement.

[careful] 30/9/2019 10:00

Read todays report.

Seems like it could be onwards and upwards to the sunlit uplands from now on.
Glorious opportunities lie ahead.

(I have been infected by optimism of the no deal Brexit crowd)

[my retirement fund] 30/9/2019 09:03

Still a complete and utter mystery to me how this stinky pile of toxic rubbish manages to be trading over 40 pence. Surely even the most optimistic of ignorantly missguided investor can manage to link together enough neurons in their skull to deduce that the game is up.

[buywell3] 30/9/2019 08:35

There will be many lessons to be learnt when this is all over

PI's and Investors will have paid dearly for them

[rcturner2] 30/9/2019 07:52

Could be just the trigger we need in an oil crisis/ME war to really drive the FTSE down.

[spectoacc] 30/9/2019 07:36

@Henchard - keep waiting for someone to ask me to prove it ;)

I see WPCT lost one, gained one this morning - Louise Makin wisely jumping ship. I do hope all these exiting WPCT Board members have good insurance.

@Jonwig - I'd still be amazed if WEIF ungates in December. He's promised to offload all the unicorns - has he offloaded a single one yet? The Temasek investment in Benevolent was surely a chance, not taken, to slot his stake.

[Altho - there's enough fools around who believe what NW says, so eg £500m left with WEIF seems likely, if IFF & WPCT anything to go by. Not sure those £500m of holdings would be too attractive.]

Edit: "-- Board continues to evaluate the position of the Portfolio Manager and remains in dialogue with other potential managers "

Continues to, eh.

[jonwig] 30/9/2019 07:27

Interim Results:



A work of Chicklit. "... the returns to be gained by delivering on the progress, I believe, will ultimately reward the patient investor."

So the poor returns in some cases were due to lower funding rounds. Ah! but the earlier higher funding rounds, manipulated by Woodfinger are not mentioned.

Here's a good one: "The valuation of Industrial Heat was marked down in August 2019 following a valuation review. The company has remained focused on further testing in September and October, with a funding round expected to follow thereafter." Not dead yet, then!

[jonwig] 30/9/2019 07:00

Telegraph:

The biggest backer and supervisor of Neil Woodford is scrambling to be ready for a “worst-case scenario” when angry investors finally obtain access to cash trapped in his flagship fund.

Fund supermarket Hargreaves Lansdown, which has hundreds of thousands of customers with a total of £1.6bn in his equity income fund, is talking to Link Fund Solutions about how to cope with demand when the shutters are lifted later this year.

In the “worst-case scenario” in which redemptions could not be met, the fund might have to be wound up and its assets offloaded in a fire sale. Customers could face losses as a result.

One insider said it would be “silly” of Link and Hargreaves not to prepare for an exodus. “This is literally their job. They are a regulated entity and it’s in their interest to get this right,” the source said of Link.

Interactive Investor, the second-largest investment platform, said it had not been contacted by Link. Investors were told by Link last week it would not allow trading without prior warning and that the suspension remained “in the interests of all investors”.

One investment expert said Link had to ensure the fund could afford to pay back customers wanting to pull their money before lifting the suspension.

The Treasury select committee said the recent suspension of parliament had prevented members from asking Link, Woodford Investment Management or Hargreaves Lansdown to provide further evidence.

Mr Woodford, once called Britain’s answer to Warren Buffet, has dumped more than £1bn of assets in a bid to improve the fund’s liquidity, after blocking investors’ access in early June.

Investors are unlikely to retrieve their trapped cash until early December, although the suspension remains subject to a rolling 28-day review.

A spokesman for Hargreaves Lansdown said: “We, alongside other platforms and administrators, are working with Link to ensure that when the Woodford Equity Income fund suspension is lifted client demand can be met in an orderly manner.”

Link declined to comment.

[chinahere] 29/9/2019 22:11

That WPCT NAV chart has a slowly reducing curve since Woody's troubles with WEIF.

I guess Link must think that announcing a slowly declining NAV is more palatable than immediate spikes downwards.

More RNS messages with NAV declines coming I'm sure.

A sad end to what was supposed to be a trust that would support UK industry and target a 10% return every year!

[henchard] 29/9/2019 21:45

Good call SpectoAcc, that was quick out of the blocks 2016.

[spectoacc] 29/9/2019 19:44

@Henchard - I'm fortunate to have called Woody in 2016 & thus saved a lot of money by not being fooled by the likes of this (from @daffy's quote above, ie from only days ago):

"...But we remain confident that the disciplined investment approach that has served Neil Woodford and his investors well for more than thirty years, is determining an investment strategy that is appropriate for the economic and market environment that confronts us."

Staggering.

[henchard] 29/9/2019 17:03

Useful insights and comments in response to mine. Being a fly on the wall at Woodford HQ the last couple of years would doubtless have been fascinating!

[jonwig] 29/9/2019 10:25

Spikey - I guess you'll find it is a bit more muscular, now. We'll see tomorrow.

[spikeyj] 29/9/2019 10:01

independent board !?!? rofl.

[cynicalbear2016] 29/9/2019 09:23

Henchard - thanks for the mention.

I don’t have inside knowledge of the valuation process but your estimate must be right in that Woody would provide updates on a regular basis and they assess for reasonableness as there is no way that they could assess progress at Immunocore for example independently.

Wouldn’t be surprised if valuation guidelines were tightened up going forward across the industry as a result.

My views fwiw on whether Woody will be replaced. I agree with the view that it is in essence in run-off and you may as well get Woody to do it for free; however, due to all the issues of the last two years, I don’t think the Board have a choice in practice and that Woody and Searle should step down just to bring some confidence to shareholders that best value will be obtained irrespective of the chaos at EIF.

[sweet karolina2] 29/9/2019 08:20

Henchard,

It is clear that everyone involved put far too much faith in the "genius" of Woodford. This is a classic emperor's new cloths scenario. What is amazing is how long it took for so many to realise Woody was really in his birthday suit, when Cynical Bear and others had so clearly shown the problem so long before.

What is also clear is that the authorities don't know how to solve the mess Woody has created because they are locking the stable door well after the horse has bolted.

Link are the ACD for all the Woodford funds. It is clear they were asleep at the wheel. Their actions now are as much driven by them saving their own face as they are by the gaping chasm between announced NAV and real NAV. IH is a good example, the writedown of its value does not even take it back to the value before the previous ludicrous write up.

[ianood] 29/9/2019 08:11

"In short, did Neil simply have too much power?"

YES!

[henchard] 29/9/2019 00:50

I'll add that if I were on the FCA investigation team, some of the questions I'd be asking are:

Did the WPCT "independent directors" decide to sack the previous valuers and appoint Link off their own bat or with Woodford's input?

Did Link get the WPCT gig on economic terms that enabled it to carry out valuations of unquoted companies with sufficiently rigorous due diligence, or did Link see Woodford as a marquee signing and operate on the basis of whatever Neil says goes?

In view of the cross-holdings with Woodford's other funds, who were the independent valuers of the unquoted companies at WEIF and WIFF?

And the over-arching question: did the amount of (other people's) money Woodford had at his disposal and his reputation, insidiously compromise the numerous parties whose function was to act in the best interests of investors - whether explicitly (eg WPCT non-executives, Link, the FCA itself) or implicity (HL, IFAs and tipsters in the deadwood press)?

In short, did Neil simply have too much power?

[henchard] 28/9/2019 23:58

Specto

"@Henchard - so, so much worse! Woody invests. Then in a later funding round, either the same Woody fund, or another, invests much less but a higher price.

Hey presto - a new valuation for Link to go off, and a big jump in NAV."

Yeah, we all know the funding rounds stuff and have for a couple of years, ever since Cynical Bear dissected it on shareprophets around Christmas 2017.

What I'm curious about is the inside track on how Link/IHSMarkit actually operate. Sure, funding rounds have been the primary source of uplifts in NAV, but there have been other catalysts for valuation upgrades, such as "operational progress" and "positive events". What information have Link/IHSMarkit based these upgrades on, what were the sources, and what were the criteria used by Link/IHSMarkit to assess whether this was reasonable?

It really needs an insider, someone who's worked in the area of unquoted valuations, to cast light on the process.

[spectoacc] 28/9/2019 16:56

@Henchard - so, so much worse! Woody invests. Then in a later funding round, either the same Woody fund, or another, invests much less but a higher price.

Hey presto - a new valuation for Link to go off, and a big jump in NAV.

I remember an article a few thousand posts above saying that 80% of later funding rounds (for perhaps IH or Benevolent) had been from Woody entities? Increasingly small amounts at increasingly higher prices.

@RCT2: "I wonder if they could even get another manager to take it on. Anyone with a brain would stay well clear."

Agreed. It's more than a can of worms, and do the Board want that can opening, or kicking down the road? Interesting how several have jumped ship.

@Daffy - thanks for copy/paste, more naive Woody stuff. He confronted KIE but not his continual averaging down in it, nor an assessment of how he got the PE-floated AA so disasterously wrong.

[henchard] 28/9/2019 15:36

The pricing of unquoted securities, in line with Financial Conduct Authority regulations, is solely the responsibility of the appointed Alternative Investment Fund Manager, Link Fund Solutions Limited ("Link"). Link provides independent oversight of pricing and conducts its own Fair Value Pricing Committee ("FVPC") with the support of an independent valuation firm it employs ("IHSMarkit").

Does anybody know how this works in practice?

I find it hard to imagine Link/IHSMarkit starting with a blank page on the valuation of each unquoted company, then trawling through everything in the public domain and arriving at £Xm.

I'd have thought it more likely Woodford provides a short dossier on each company, latest funding rounds, size of the potential market opportunity of the products, valuation comparison with listed peers and so on - basically a general justification of what he (and fellow cornerstone investors where applicable) think the business is worth. Link/IHSMarkit then check the veracity of the information and decide whether the valuation is reasonable (presumably within a fairly wide ballpark).

I imagine this is how it works, but does anyone have experience or knowledge of the process and know for sure?

[jonwig] 28/9/2019 14:53

Thanks kooba.

The most damning article yet, with citations from industry professionals.
Clickable link:

[kooba] 28/9/2019 14:23

Woodford on the brink of exit as trust results loom Neil Woodford's role as manager of the investment trust that bears his name looks ever more perilous following a spate of damaging writedowns and simmering tensions between Britain's best-known stockpicker and the fund's independent board.https://www.ft.com/content/0da98d40-e12c-11e9-9743-db5a370481bc

[jonwig] 28/9/2019 09:37

Another manager?

The running costs of WPCT are £1.5m pa, so they need a manager, even to achieve run-off.
Woodfinger's WIM could go bust (that depends on how WIFF and WEIF fare) and/or he could lose his FCA licence. That would be popular in the trade.
I think a manager can be apppointed by fiat from the FCA to wind down the trust. There are plenty of semi-retired ones who could be co-opted.