Digital 9 Infrastructure has announced its intention to wind down, just three years after launching.
In a stock exchange announcement this morning (29 January), the £889m trust’s board said it would be “in the best interests” of shareholders to wind down the trust, after consulting a large number of investors and a strategic review. As part of that process, it has served 12 months’ notice on investment manager Triple Point.
D9’s discount had slid to 76%, according to the AIC.
Charlotte Valeur, interim independent chair of D9, said: “Throughout the strategic review process, the board’s primary objective has always been to maximise shareholder value going forward. Having carefully considered a number of options, we have ultimately concluded that a managed wind-down of the company is likely the best route to achieve this objective and seek to address the discount to NAV that impacts our shareholders.
“The board will assess the progress of the proposed asset sales on an ongoing basis and will continue to monitor other potential opportunities to realise income and capital value for shareholders as they arise. We will also continue to engage in active dialogue with our shareholders throughout this process.”
The trust will look to sell its wholly-owned assets later this year.
However, D9 is likely to hold onto its stake in Arqiva for a longer period, as the board noted that maximising the value of its shares is likely to take longer than other investments.
“As such, while D9 will continue to consider and be open to all options for Arqiva which are value-accretive to shareholders, the board has decided to defer a sale process for D9’s stake in Arqiva for the time being,” the board said.
‘Damned if you do, damned if you don’t’
Analysts at QuotedData said the board had been in a ‘damned if you, damned if you don’t’ situation, as if it had decided to attempt to narrow its huge discount through buybacks, rather than a managed wind-down, assets would have been sold anyway.
They said: “It’s sad to see a trust as unique as DGI9 infrastructure go, as it and Cordiant offer something genuinely different within the trust space, however given the board’s predicament it is entirely understandable.
“The trust has been trading on a c.70% discount since December, one of the widest of any investment trust. It would likely take more than market sentiment to reverse this. If they did not pursue a wind down the board would still have been forced to sell down assets to implement a buyback scheme. Given the illiquidity of their assets they would likely, as with their previous sale of Verne, be forced to sell their higher quality assets to raise capital in a timely manner.”
QuotedData added: “This would be a double-edged sword however, and investors would further question the validity of their remaining holdings, compounding their woes. The board have effectively been left with a damned if you do, damned if you don’t situation, where a full wind-down was likely the only practical path to maximising shareholder value.
“One remaining hope might be that a bidder emerges for the whole company, but given the disparate nature of its assets, that seems unlikely.“
The trust is due to release a trading update over the next few weeks ahead of its full-year results.
