New NAV

This morning, Chrysalis announced that its NAV at end March 2025 was 152.62p, 2.6% lower than at the end of December 2024. In part, that reflects adverse currency moves, which took about 1.7p off the NAV.

Richard Watts and Nick Williamson said “Overall, the portfolio continues to perform well. The top five assets now account for 81% of net assets (85% of the portfolio) mainly due to the sale of Graphcore and Featurespace. Following the recent restructuring at wefox, all of the top five assets are now operating at breakeven or are profitable, resulting in 88% of the portfolio being profitable versus 44% in the prior year; this reflects the proactive measures our investee companies have taken.

Shortly post period end, the sale of InfoSum to WPP plc was announced at a 16.4% uplift to the company’s December carrying value, equating to an increase in NAV of approximately 1.2 pence per share. The company has now received proceeds of approximately $63m (£49m), which significantly improves its liquidity position.

We continue to see a substantial opportunity to grow NAV over the coming years, driven by the performances of the major assets, which are well placed to capitalise on various growth opportunities and structural tailwinds. Starling remains the largest position within the portfolio, and we believe the company has multiple levers for growth, some of which have the potential to transform its valuation basis.

While it is disappointing that recent stock market volatility has delayed the IPO of Klarna, we do not believe these conditions will have a detrimental impact on its financial performance, placing it in a good position to float when uncertainty abates.

The company currently has a gross liquidity position of approximately £153m, equating to £83m, net of the Barclays loan facility; these figures represent 30% and 16% of the company’s current market capitalisation.”

Launch of shareholder consultation

As part of its ongoing shareholder engagement, the board – alongside its advisers and the investment adviser – has held discussions with a wide cross-section of shareholders over recent months, covering approximately 50% of the share register.

Asset Value Investors (AVI), the company’s largest shareholder (as the manager of a number of underlying funds – including AVI Global Trust), recently wrote to the board requesting that a continuation vote be proposed at the 2026 AGM. The letter was co-signed by a group of other shareholders, with the signatories collectively representing approximately 27% of the company’s shares at the time.

The board believes that the appropriate timing for the next continuation vote remains the 2027 AGM, as stated in the company’s articles, but in light of the shareholder letter will put forward an ordinary resolution to the 2026 AGM (see below) to seek shareholders’ reaffirmation of the current Capital Allocation Policy (CAP), or, where appropriate, propose amendments to the CAP, pending the continuation vote in 2027.

Certain other themes have emerged through this recent engagement, which have highlighted the range of differing views among the shareholders. These include preferences and/or proposals that:

1. No new investments be made under any circumstances;
2. All net realisation proceeds be returned at NAV;
3. The investment management agreement be amended to align remuneration more closely with a realisation-led strategy;
4. A dual-share-class structure be considered to accommodate diverging investor priorities; and
5. New directors be appointed, one of whom to be appointed as chairman, to more directly reflect views of some shareholders.

The board, its advisers, and the investment adviser have engaged extensively with AVI and other signatories, and more informally with a broad range of other shareholders on these themes. It is clear that there is a diversity of views on:

• How best to return capital (buybacks vs tenders vs redemptions);
• Whether and when to recommence investment activity; and
• The feasibility and merits of structural solutions, including dual share classes.

The board has therefore decided that a more formal consultation will most fairly collate the views of as many shareholders as possible to create a balanced assessment of the merits of these themes.

Given the success of the 2023/24 consultation process, which resulted in the current CAP being approved, the board has asked Rothschild & Co. to conduct a further formal consultation that will start as soon as practically possible. In 2023, Rothschild spoke to around 70% of the shareholder base, and the board is again seeking wide participation to ensure it has a representative view when evaluating options. Findings will be shared in Q4 2025.

Whatever the outcome, the board believes that the success of the realisation programme means that a proposal for the company’s future CAP must be put forward in advance of asking shareholders to consider the 2027 continuation vote.

[QD comment (James Carthew): Chrysalis was launched in November 2018. Its investment approach is naturally a long-term one – it takes time to build businesses. It has demonstrated its ability to create value for shareholders and, in recent years, it has done so in adverse market circumstances – most recently resulting in the delay to Klarna’s IPO. The trust’s capital allocation policy is translating into significant returns of capital. The board and adviser have committed not to make new investments this year and consider new investments only in the context of the prevailing discount. We are not convinced that a continuation vote would help at this time.]

CHRY : Chrysalis launches shareholder consultation in face of AVI’s calls for a continuation vote