Woes continue for Chrysalis as Starling keeps heading south

NAV has fallen more than 40% in a year

Nick Williamson and Richard Watts 2022 Chrysalis
Nick Williamson and Richard Watts


The hits kept coming in Chrysalis’ fiscal fourth quarter, with major holding Klarna suffering a write down, Revolution Beauty suspending trading and Jupiter selling off its stake in Starling at a “reduced valuation”.

This all converged to shave nearly 10% of the trust’s net asset value in just three months to hit 147.9p per share. Compared with 30 September 2021, NAV is down 41%.

It was the firm’s private holdings which caused the biggest headaches, carving nearly 72p off the NAV per share, while listed holdings sliced off a further nearly 32p.

Starling, which makes up 13% of the portfolio, was by far the largest driver behind the drop in NAV, but the trust voiced its disappointment given what it judged to be a solid operational performance from the bank in the quarter. Starling, along with holdings Graphcore and Infosum, were marked down following a derating of their listed peers.

Chrysalis also exited its position in e-commerce retailer THG, and now dedicates 8% of its portfolio to cash as of 17 November. This is up from 7% on 30 September, making cash its sixth largest holding.

The torrid 2022 Chrysalis has endured stands in marked contrast to 2021, in which the trust experienced rapid growth. With the proceeds, it added the holding in Starling, as well a stake in insurance company Wefox. By way of a performance fees, co-managers Nick Williamson (pictured left) and Richard Watts (pictured right) were given a combined £60.5m in newly issued shares in January.

According to data from investment bank Liberum, 56% of the 103.8p year-on-year decline in NAV was accounted for by Klarna; the ‘buy now pay later’ firm suffered a staggering 86% value reduction during the summer, falling to £5.6bn.

As of 17 November, Liberum estimated that Chrysalis’ NAV is around 144p, a further reduction of 3.6% from 30 September. Shares are now trading at a discount of 57%, with the trust having sustained a near 75% reduction in its share price YTD.

Despite some ugly numbers, Liberum and Chrysalis are relatively optimistic about the trust’s prospects. Deep Instinct and Featurespace were among its better-performing holdings, and Liberum stated that the underlying businesses in the portfolio were performing strongly, with aggregate revenue growth across the portfolio expected to be 53% in the next 12 months.

Liberum added that 35% of its holdings are profitable, and that a further 32% were “funded through to profitability”.

Managers Williamson and Watts said: “We are very encouraged that in an extremely challenging market, five of our largest holdings have raised $1.5bn (£1.3bn) in aggregate over the calendar year to date, with some welcoming new high-quality investors onto their share registers. We believe this demonstrates the ongoing strong performance of these assets and their compelling investment cases. Furthermore, the robustness of our valuation methodology is demonstrated by the fact that four of the five funding rounds were completed above the prevailing carrying value in Chrysalis.”

The trust’s share price was down 1.1% at 62.3p just after 1pm on 21 November.

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