Woodford Patient Capital board statement

Woodford Patient Capital board statement – the board of Woodford Patient Capital has released a statement this morning. Here it is:

The board of Woodford Patient Capital Trust plc (the “Company”) notes the recent developments at Woodford Investment Management Ltd.

Following the events relating to LF Woodford Equity Income Fund (“WEIF”), the board also notes the reaction in the company’s share price and the share prices of certain quoted portfolio companies in which WEIF is also invested.

The board is pleased with the operational progress of its portfolio companies, which the board believes continue to have the potential to deliver attractive returns, in line with the long-term mandate of the company. The operational performance of these businesses is not impacted by recent events.

Susan Searle, chair, commented: “The board is closely monitoring the situation and is engaging with its shareholders and advisers. Separately, the board is in regular dialogue with the portfolio manager. The board wishes to emphasise the long-term approach of the company and will continue to keep shareholders updated as necessary.”

[QD comment: Readers who don’t have an investment in any Woodford product may be wondering what the fuss is about.

We have long held the view that open-ended funds should not hold investments that are hard to turn into cash – that goes for property as well as unquoted companies. A string of negative publicity and poor performance has seen investors in the open-ended fund run for the exit.

The open-ended fund breached a limit on the amount of unquoted investments it was allowed to hold and tried to fudge the issue by swapping stock into Woodford Patient Capital and listing some unquoted companies on an exchange based in Guernsey.

As the outflow continued, big investors (notably Kent County Council) tried to cash in their investment too. Woodford gated (closed) the fund fund to give them breathing space to sell investments. Other investors that had placed money with Woodford demanded it back. Many of these funds have the same holdings. Many different people are now trying to sell the same stocks at the same time and this is driving down values.

The open ended fund holds a chunk of Woodford Patient Capital and this may now be up for sale, weighing on the Patient Capital share price. The open-ended fund needs to sell investments that Patient Capital holds and this may drive down Patient Capital’s NAV.

Woodford Investment Management and the open ended fund may not be able to survive this but Patient Capital might as it does not have to sell investments. Patient Capital may need to look for a new investment manager and, in this regard, it seems strange that the board has not taken the opportunity to serve notice on Woodford Investment Management.

Patient Capital is geared (unusually for a fund of its nature) and so cannot buy back its shares even at wide discounts unless it can cash in some investments. For the moment it looks as though the board is sitting on its hands and awaiting developments. Some shareholders might not be happy with this.]

WPCT : Woodford Patient Capital board statement