Merian Chrysalis (MERI) announced a proposed equity placing targeting £50m. The placing is priced at £1.48, which represents a premium to the estimated NAV per share of 142p, as at 30 June 2020.
MERI also took the opportunity to announce a £15m follow-on investment in a convertible loan note of FinanceApp AG (wefox), which it describes as Europe’s largest digital insurance platform.
Retail investors able to participate too
Along with the placing, there will be an offer made by MERI on the PrimaryBid platform of additional new ordinary shares at the placing price.
As always, we aren’t recommending that you buy the stock but we think it is interesting and you might want to read about it. The offer isn’t open to everyone – you should read the disclaimers and the risk warnings in the attached documents released by MERI – click here and here to access the documents.
One of the intermediaries for this offer is Primary Bid.
Marten & Co/QuotedData has an arrangement with PrimaryBid whereby, if you sign up to them after clicking the link above we can earn a commission.
MERI substantially fully invested, looks to make an imminent investment in new target
MERI says that in light of recent investments, including today’s announcement of the follow-on investment into wefox, it is now substantially fully invested. MERI’s manager continues to see significant opportunities and has identified one in particular, which it would like to pursue immediately. In today’s announcement, it is noted that subject to the completion of successful final due diligence, a large proportion of the placing net proceeds are expected to be invested in the target within four weeks.
‘Target operates in a very large market and currently controls only a small market share’
MERI describes the target as follows:
- “It operates in a very large market and currently controls only a small market share;
- It is providing technology and solutions that are proving significantly disruptive to incumbents;
- It has displayed significant growth over many years and, given barriers to entry, has the potential to continue to do so;
- It has attractive recurring revenue streams;
- It has the opportunity to drive economies of scale through its operating model as it grows; and
- It has a strong and well-respected management team.”
Outlook extract from today’s announcements
“Hitherto, the manager has been able to leverage its connections to allow MERI access to investment in global leaders, despite its relative immaturity and small size in its early life. The manager believes the company is now of a scale commensurate with other leading mid-market European growth investors and sees a good and realistic opportunity to grow the company’s scale further, an ambition clearly set out at MERI’s IPO.
The company currently has the ability to make investments of approximately £100m under its investment policy (based on the prevailing net asset value), which allows it to begin to compete credibly with many of the key global growth investors. Due to their nature, global leaders are typically among the largest of private companies; increasing scale from current levels would allow the company to ensure the best possible access to deals in this “leadership” space in the future. The proposed placing represents another step in the direction of greater scale.
MERI believes it has demonstrated considerable success in the early part of its existence, as evidenced by NAV growing from 98.5p immediately following IPO, to a current estimated NAV of approximately 142p (adjusted as described above) in roughly two years. Despite a number of its key assets seeing substantial write-ups in valuation over the last few months, which have fuelled this NAV performance, the manager believes the outlook for these assets remains very favourable, given their implied valuations and forecast growth rates, in each case relative to listed peers. Although the significant majority of NAV progression since the March 2020 quarter has been driven by four assets, namely TransferWise, The Hut Group, Klarna and Embark, the Investment Adviser remains of the view that there is material latent value in the rest of the portfolio in aggregate. As a result, the manager is optimistic over prospects for the Company’s portfolio companies.
While stock market-implied risk, as measured by the VIX index, has diminished from its COVID-19 induced spike in March, it is still at levels above the average that predominated over 2018 and 2019. The manager has always looked to insert investor protection mechanisms into its investments wherever possible, which help to insulate shareholders against deratings in the listed market comparison peer groups typically used by valuers to assess holding valuations. Based on the assumption that the valuation of each asset fell by 25%, and an approximate £40 million investment in the Target, the manager estimates NAV would only fall by approximately 13%. This would represent substantial downside protection for investors, while still allowing participation in upside if the manager’s investment theses are met.”
MERI: Merian Chrysalis announces £50m placing and follow-on investment in leading European digital insurance platform