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QuotedData’s morning briefing 16 September 2022

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In QuotedData’s morning briefing 16 September 2022:

  • RTW Venture’s (RTW’s) portfolio company, Third Harmonic Bio Inc., has completed its initial public offering (IPO) and has listed on Nasdaq (ticker: THRD). The upsized issue raised US$185.3m by offering around 10.7m shares at US$17.00 per share. Third Harmonic Bio is a clinical-stage biotechnology company developing a first-in-class, selective, oral KIT inhibitor for the treatment of severe allergy and inflammation. Its lead asset, THB001, is in Phase 1 clinical trial for the initial indication of chronic urticaria, a dermatologic disease driven by mast cell activation that results in red, itchy, painful welts or hives that develop in response to a specific stimulus (inducible urticaria) or with no known cause (spontaneous or idiopathic urticaria). Beyond chronic urticaria, Third Harmonic Bio plans to pursue development of THB001 in additional diseases of the skin, airway, and gastrointestinal tract in which mast cells play a known role in the pathophysiology of the condition. On the first day of trading, Third Harmonic Bio’s share price traded up by 15.8% to close at US$19.68 per share. Prior to IPO, RTW, together with other funds managed by RTW Investments, LP, participated in Third Harmonic Bio’s US$105 million Series B financing round in December 2021.
  • Schroder Asian Total Return (ATR) has published its interim results for the six months ended 30 June 2022. During the period, it provided NAV and share price total returns of -16.4% and -18.7% respectively, both of which markedly underperformed the trust’s benchmark (the MSCI AC Asia Pacific ex-Japan Index) which returned -5.9% as well as the average NAV total return of its peer group, which was -8.5%. ATR’s chair, Sarah MacAulay says that, following the unexpected Russian invasion of Ukraine, the deteriorating outlook for the global economy significantly impacted Asian stock markets and ATR’s relatively large holdings in global leaders of the technology and semiconductor sectors were particularly hard hit.
  • Ecofin US Renewables Infrastructure (RNEW) has announced its interim results for the six months ended 30 June 2022. During the period, RNEW provided NAV and share price total returns of 1.2% and 67.4% respectively. Subsequent to the period end, RNEW announced that portfolio managers Jerry Polacek, Matthew Ordway and Prashanth Prakash had resigned from their roles at Ecofin to pursue a new venture. The Board says that it was very disappointed by these resignations and that, in an ideal world, it would have had more notice, and, working together with Ecofin, would have been able to effect a smooth transition to a new team, but this was not possible principally because notice periods in the US are typically much shorter than in the UK. Since the announcement, the Board’s priorities have been to ensure that Ecofin concentrates on:
    • management of the existing asset portfolio, the ongoing performance of which enabled the Company to declare a dividend for the second quarter of 1.4 cents per share on 28 July 2022, consistent with the dividend yield target for the year ending 31 December 2022 of 5.25 cents – 5.75 cents as set out in the November 2020 IPO prospectus; and
    • recruitment of a new leadership team. The Board has stressed to Ecofin’s senior management that this needs to happen without delay and has been assured that it is an absolute priority. The Board has been receiving regular updates from Ecofin.

RNEW’s board believes that focusing on these priorities is the best way to protect value for the trust’s shareholders, but says that it is very conscious of its duties to shareholders and, while the directors are strong believers in the US renewable energy story and RNEW’s investment strategy, the board is open to exploring all options for the future of RNEW consistent with good governance. It should be noted that Ecofin has confirmed to the Board that the ongoing management of the existing portfolio is unaffected by the resignations, and the Board will continue to work with Ecofin to ensure that this remains the case going forward.

  • Dunedin Enterprise (DNE) has published its interim results for the six months ended 30 June 2022. During the period, it provided NAV and share price total returns of 4.0% and 9.4% respectively. The realisation of Incremental was completed in March 2022, generating proceeds of £7.9m, with further proceeds are expected to be received from the sale as a result of an earn-out provision (the investment was valued at £5.6m at 31 December 2021). DNE’s remaining holding in CitySprint completed in January 2022 with proceeds received of £1.5m. Following the half year end, it was announced that Dunedin Buyout Fund II LP has entered into a legally binding agreement to realise the investment in RED. The transaction is subject to funding and regulatory approvals and is expected to complete in the second half of 2022.  The investment in RED was valued at £23.7m in the Preliminary Unaudited Net Asset Value at 30 June 2022 published on 1 August 2022.  Proceeds from the sale are expected to amount to £23.7m. There are also future potential proceeds from an earn-out arrangement which are dependent upon RED achieving profit targets in the year to 31 March 2023.  No valuation has been placed on the earn-out at 30 June 2022. Unrealised valuation increases totalling £7.7m were offset by value decreases of £6.1m. The valuation uplift was primarily generated from RED and Incremental. At 30 June 2022, DNE held cash and near cash equivalents totalling £30.0m out of total net assets of £74.6m and, following completion of the RED realisation, cash reserves are expected to increase to £53.7m.  There are outstanding commitments to limited partnership funds of £9.7m at 30 June 2022, consisting of £9.0m to Dunedin-managed funds and £0.7m to Realza. The Board reiterates that it is committed to returning proceeds of asset sales to shareholders and doing so efficiently. While the portfolio realisation process continues, the Board will look at opportunities to combine the proceeds of more than one sale before conducting a tender to achieve economies in the process.  Once funding and regulatory approvals are received on the realisation of RED the Board intends to announce a distribution to shareholders.
  • Baker Steel Resources (BSRT) has published its interim results for the six months ended 30 June 2022. During the period, BSRT’s NAV per share fell 18.3% to 80.4 pence per share, and its share price fell 12.67% to 65.5 pence per share. BSRT’s chairman, Howard Myles says that first half of the year was a difficult one for precious metals mining shares which were weaker in line with a decline in the prices of gold and silver as well as a very bearish sentiment in general markets. BSRT says that it was a frustrating period for the trust’s largest investment, Futura Resources. With all planning and environmental permissions in place other than the final operating licence which is pending the completion of financing, Futura has been seeking the finance to start production from both its Wilton and Fairhill mines in Queensland. At current coking coal prices the approximate A$50 million capital required to bring both mines into production could be recouped in less than a year but the funding of coal from traditional providers such as banks or institutional investors has become increasingly challenging on growing ESG reservations. Futura was close to finalising a loan via an offtake arrangement to be able to start both mines when the Queensland government unexpectedly introduced higher royalties at high coal prices. Although the effect of these additional royalties on Futura’s economic forecast was minimal, as the new royalties only apply at prices above the long-term consensus pricing used in the economic model, BSRT says that it was an unwelcome measure to the Queensland coal industry and proved untimely for Futura in closing its financing arrangements. Futura remains in discussion with a number of parties to finance the start of its mines and it is hoped a closing can be achieved in the next few months.
  • Gulf Investment Fund (GIF) has announced the launch of its 100% tender offer. The tender price will be dependent on the price at which any assets that comprise the tender pool are fully realised at, as well as the apportionment of the costs associated with the tender offer (these are expected to be approximately US$100,000) across the tendered shares. GIF says that, dependent on the number of tendered shares, the allocation of these costs may represent a material discount to the NAV per share at the calculation date. As such, the directors will be able to cancel the tender offer if they consider that it is no longer in the best interests of the company or shareholders to proceed. In addition, the directors are not obliged to proceed if they consider that the tender would results in a subscale and illiquid fund. In practice, this means that, for the tender to proceed, GIF must have a resultant share capital of at least 38m shares. Assuming that this minimum size condition is met, any tendered shares will be cancelled. GIF’s investment adviser has indicated its intention to remain invested and will not participate in the tender offer.

We also have Octopus Renewables Infrastructure’s purchase of two new assets.

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