Merian and Mobius return to markets after volatility hit trust IPOs

A number of investment trust launches fell short of target in Q4 2018


Merian Chrysalis and the Mobius Investment Trust are eyeing improved conditions for raising cash six months after their closed-ended funds undershot IPO targets at launch.

On Tuesday morning, both investment trusts published regulatory filings regarding fresh fundraising.

Already this year M&G Credit Income raised an additional £25.3m from investors via an oversubscribed issue several months after it played down the £100m raised in November, well short of its £250m IPO target.

Merian Chrysalis is seeking an additional £50m via a placing for a pipeline of eight opportunities after its IPO raised half the £200m in November. It is trading at a 14% premium, although its net asset value is based on unquoted companies.

The Mobius Investment Trust, where shares are trading 5.2% above net asset value, revealed it issued 125,000 new ordinary shares of 1p each at a price of 102 pence per share on Monday. The approximately £127,000 raised was much smaller than the raise sought by Merian Chrysalis, but the trust simultaneously applied for a block listing that leaves the potential a further 19,875,000 shares to be issued under the board’s existing authority.

In late September, the emerging markets investment trust fell short of its £200m IPO target, instead reaching £100m. The star fund manager behind the launch, Mark Mobius (pictured), blamed timing and negative emerging market sentiment for the disappointing result.

Secondary market trading buoys confidence

With the exception of the blockbuster £822m raised by the Smithson Investment Trust, a number of investment trust IPOs came in around £100m despite seeking higher targets in Q4 2018, said Winterflood Investment Trusts head of research Simon Elliott.

“It’s interesting that these companies have all undershot a little bit on their IPOs but as they’ve continued to trade well in the secondary market, they’ve sustained premiums, they’ve been able to deploy capital, they’re confident they can come back to markets and raise a little more,” Elliott said.

He described the current market environment as a “difficult, not impossible” time to be raising money depending on the investor base. “It would be a tough call to raise money for UK equities at the moment, but with Merian, Mobius and M&G Credit, there is a slightly different investment story there.”

Merian Chrysalis pipeline

Merian Chrysalis is in discussions with eight potential portfolio companies covering sectors such as fintech, e-commerce and software-as-a-service, which in aggregate are seeking to raise up to £220m.

It is actively reviewing more than 50 high-growth potential investments, the regulatory filing said.

It has already deployed 85% of the net proceeds from its £100m IPO with £22m in Transferwise, £13m in Secret Escapes, £9.5m in The Hut Group, £25m in Graphcore, £19m in Starling Bank and £5m in Growth Street.

The placing will close on 15 April or earlier if commitments exceed £75m.

Mobius employs premium control

The Mobius Investment Trust said its issuance was intended to ensure its premium did not reach excessive levels, while growing assets under management would reduce ongoing costs per share plus enhance secondary market liquidity.

The closed-ended fund has the authority to issue a further 19,875,000 ordinary shares.

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