Chrysalis Investments is set to benefit from a “material uplift” to its net asset value after one of its largest holdings has blossomed into a £1bn unicorn.
Starling Bank, which is the portfolio’s third largest holding, confirmed on Monday it had exceeded expectations with its latest fundraise, bringing in £272m, higher than the £200m that had been anticipated.
The funding round, led by Fidelity Investments and counting the Qatar Investment Authority, Railpen Investments and Millennium Management among its backers, was the biggest fundraising in the digital challenger bank’s seven-year history.
The business is now valued at £1.3bn, making it the newest British banking unicorn.
Starling Bank fundraise results in second ‘material uplift’ to NAV in March
In a separate stock exchange announcement, the Chrysalis board said the latest funding round “represents a material uplift” on the trust’s carrying value of the asset and would result in a gross NAV per share increase of 6p compared to its last reported NAV of 180.75p at the end of December.
At the end of December, Starling Bank represented 11% of the portfolio, putting it at an equal weighting to European digital insurer Wefox and just under Transferwise (12%). The Hut Group, which IPO’d last September for £5.4bn, is the trust’s largest holding at 15%.
This is the second time the trust’s NAV has been rewritten upwards this year. At the beginning of March, it enjoyed a 32p gross increase to NAV after Klarna completed a $1bn funding round, which valued the Swedish ‘buy now, pay later’ firm at $31bn, six times higher than what it was worth 18 months ago.
Chrysalis leaves its options open to participate in Starling fundraise
While managers Richard Watts (pictured) and Nick Williamson did not participate in the latest fundraise the trust has a structured option, but not an obligation, to participate should it wish to do so in the future.
Last month the co-managers said they were seeking to issue over 600 million ordinary and/or C shares to take advantage of a £1bn pipeline of investment opportunities, as well as £250m worth of follow-on ideas related to existing holdings. Shareholders overwhelmingly approved the placing programme at an extraordinary general meeting held after the trust’s AGM on Monday.
Watts and Williamson referred to Starling’s growth as “exceptional”. Customer deposits at the digital bank have ballooned from £1bn in February 2020 to over £5.4bn a year later and it has achieved four consecutive months of profitability with net new income exceeding £1.5m per month since January 2021.
“The endorsement of its valuation and validation of its operating model by new investors underlines the recent progress made,” Watts and Williamson said. “We believe the expansion of the shareholder base gives Starling a very strong footing from which to continue its growth trajectory, and given its operational gearing dynamics, we remain highly optimistic over its financial prospects.
“We believe the likelihood of further value creation for the company’s investors is significant from this asset, and as such, we have negotiated the option for Chrysalis Investments to participate in this round in the coming months.”
Chrysalis ascends to the FTSE 250
Last week Chrysalis was promoted to the FTSE 250 in the index’s latest quarterly rebalance just two and half years after launching in November 2018.
In 2020, the £817.9m trust’s NAV grew by an explosive 42%, the highest in its Growth Capital peer group. It currently trades at a 12.9% premium, according to data from the Association of Investment Companies.
