(Update) Chrysalis (CHRY), the £539m pre-IPO growth capital fund stuck on a 35% discount, has proposed a three-year realisation programme with a 2029 continuation vote.
Concluding a lengthy consultation with shareholders, the investment company said it would hold an extraordinary general meeting in February to approve the change in investment policy that will see no further investments made as fund managers Richard Watts and Nick Williamson gradually sell assets and return cash to shareholders.
The Chrysalis board believed this was the best way to balance shareholders’ conflicting wishes with some seeking an early exit from a fund that has fallen a third over five years, and an equal number wishing to remain invested in shares that have returned 47% in a three-year recovery.
A dual share class structure, that would have separated the two groups of shareholders into a continuation camp and a realisation group, was considered but rejected as too complex.
The company said: “Proceeds received from the sales of assets will be returned to shareholders in an efficient and timely manner, including via mechanisms such as tender offers at NAV or share buybacks, subject to the maintenance of a working capital buffer.”
The shares rose 2.6p, or 2.3%, to 113.6p. They have rallied from 52.9p in October 2023 and regained their 2018 float price of 100p in May, but remain well below their 271p peak in September 2021.
The announcement came in annual results showing the £874m portfolio made a 21.5% underlying investment return in the year to 30 September. Shareholders received a 29.9% total return as the discount – or gap between the share price and value of its investments – narrowed to 29% before widening again since the financial year-end. The growth was primarily driven by Starling, the challenger bank that accounts for 46.5% of net assets, and a recovery in online insurer wefox which represents 10% of the portfolio.
Stifel analyst Iain Scouller said: “We think it is unfortunate that a dual-share structure did not appear to work. It has done in the past, with Martin Currie Capital Return (now named CT Private Equity) going down this route, with a continuation class and realisation class. Perhaps the concentrated nature of the Chrysalis portfolio was a stumbling block.”
Our view
James Carthew, head of investment company research at QuotedData, said: “I am very disappointed by Chrysalis Investments’ decision to wind down the portfolio and make no new investments. It seems to confirm UK investors’ short-term mindset and underscores how bad we are as a nation in backing growing companies.”
