Merian Chrysalis is set to receive an 8% boost to its net asset value as it sells down part a portion of a mystery holding at a “material mark-up”.
An RNS filing from Monday shows the £418m trust had entered into a transaction to partially realise one of its portfolio investments. The sale of the holding, which has not been named, is expected to raise £20m.
Merian Chrysalis said the deal represents a “material mark-up” of the portfolio company’s current carrying value and will add 9p to NAV per share, an 8% increase to its reported NAV of 108.7p at the end of March. Its share price was muted on Monday morning, down 0.39% at midday.
This marks Merian Chrysalis’ first realisation since debuting on the London Stock Exchange in November 2018. Merian’s debut trust, run by Richard Watts (pictured) and Nick Williamson, only raised half of its £200m target at IPO, falling well short of rival small and mid-cap closed-ended fund, Smithson Investment Trust, which raised a record £822m when it launched a month before.
Analysts hail Merian Chrysalis’ ‘profitable’ realisation
The news was uniformly hailed by analysts as a positive development for shareholders.
Numis Securities said the realisation “should provide investors with some comfort around its valuations as it is a very profitable one”.
Elsewhere Liberum noted that the realisation will also reassure investors the small and mid-cap trust has plenty of liquidity.
“These funding rounds not only offer scope for significant NAV uplifts, but also the opportunity to realise some of the gains,” it said in a note. “The Merian Chrysalis portfolio includes some of the highest valued private companies in Europe, which should offer further liquidity events in the short to medium-term, either through secondary private sales or an IPO.”
Merian Chrysalis’ portfolio has a high exposure to tech-enabled businesses that have experienced little to no impact from the Covid-19 outbreak, Numis added. The trust’s top 10 holdings include, e-commerce firm the Hut Group (9%), Swedish payments app Klarna (9%) and Transact parent company Embark.
Since the coronavirus sell-off on 20 February, the trust is down 2.9% versus the IT Growth Capital sector which has fallen 4.8%.
Transferwise pegged as mystery holding
While Merian Chrysalis did not disclose the mystery holding Liberum speculated the announcement relates to the reported secondary sale by Transferwise, its largest holding.
Sky News reported earlier this month that the online money transfer service was close to finalising a £240m secondary sale which would revalue the UK start-up at £4bn.
“Following this news, we calculated a £30m (8%) revaluation gain for Merian Chrysalis, which is in line with this morning’s announcement,” Liberum said in an analyst note. After the £20m partial disposal, we estimate the fair value of TransferWise will be c.£77m (19% of NAV).”
Transferwise is currently Merian Chrysalis’ largest holding, making up 14% of NAV at the end of March.
