Valeria Martinez, Investment Week, 13 March 2024:
With tentative signs of life in the IPO market and the potential for capital returns on the table, Chrysalis Investments appears to be navigating a turnaround after enduring over two years of turbulence.
The £820m trust is due to face its first continuation vote at the upcoming annual general meeting on Friday (15 March), which will coincide with an extraordinary general meeting to consider management arrangements, revised fee changes and a new capital allocation policy.
Chrysalis backed a number of technology firms that boomed in 2020 and 2021. However, with the market’s shift away from growth stocks in early 2022 and a raft of negative headlines, its market capitalisation plummeted from more than £1.4bn in March 2021 to £313m by March 2023..
After a torrid two-and-a-half years, however, the trust’s shares have enjoyed a strong recovery over the last six months as the prospects of interest rate cuts and signs of life in the IPO market have come into view..
The manager said that Klarna’s IPO, if it does come, could be a “significant realisation event”, while the unnamed ‘likely disposal’ announced in December could meet the £50m liquidity buffer and leave the door open to the £100m buyback..
After the trust’s latest investment in Smart Pensions, Chrysalis has £27.2m of liquidity, including a £13.6m position in listed company Wise. This takes the trust’s net cash to £13.6m, equivalent to 1.6% of NAV.
Despite this, Darius McDermott, managing director at Chelsea Financial Services, a long-time Chrysalis backer, said he expects the vote to pass “comfortably”, a view echoed by QuotedData head of investment companies James Carthew.
“There is significant room for NAV uplifts as and when they sell things. The more this cash is freed up and the buybacks start, I think you could see quite a sharp narrowing of the discount, and then people will be happy to carry on going,” Carthew added.
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