Woodford Concerns

Alistair31

Brian65 wrote: »

Shares in Stobart, in which Woodford is the largest investor, have now been suspended over accounting irregularities.
As he contemplates his £7million salary and £30 million dividend, does Woodford regret being such a failure?

I heard the Stobart story on the radio and came straight here to comment. Neil certainly knows how to pick em.

What a sorry mess.

Brian65

arnoldy wrote: »

What has changed since the last valuation?

More money has been spent on research

arnoldy wrote: »

What new facts have emerged?

Basically none. The money spent on research has produced nothing of value.

AnotherJoe

arnoldy wrote: »

Absolutely fuming with Link Solutions. Quite why they have a licence to practice in UK is quite beyond me after the Hargreaves Landsdown - Woodford - Link Solutions Shenanigans.
So they have marked down IH massively - without as far as I can tell any new evidence. Thus affecting WPCT.
What has changed since the last valuation?
The penny has dropped it's a scam?
What new facts have emerged? Or rather as I suspect they completely overvalued Industrial Heat, and can now bury the bad news on a pre bank holiday Friday.
If they give it any value then yep,it's over valued.
In most professions that level of professionalism would get you banned.
Sorry for the rant.

See my earlier post, I reckon they are gradually running down it to zero but it would be too embarrassing to do that in one fell swoop after uprating it 3.5x a few months ago.
In my book they are a shambles and have zero credibility.

Alexland

Alistair31 wrote: »

I heard the Stobart story on the radio and came straight here to comment. Neil certainly knows how to pick em.

From what we know so far about the truckers, overstating their operating profit by 4% is hardly going to take the company down so for Woodford this is one of his better problems.

Alex

bowlhead99

arnoldy wrote: »

Absolutely fuming with Link Solutions. Quite why they have a licence to practice in UK is quite beyond me after the Hargreaves Landsdown - Woodford - Link Solutions Shenanigans.

I'm aware of Link being the Woodford funds' ACD, as they are for various other funds. They have lots of other clients. What are the HL - Link Solutions shenanigans to which you refer, that should have resulted in them losing their licence to operate? Are you just upset they quite sensibly suspended the fund? Or is it some other 'shenanigans' issue?

So they have marked down IH massively - without as far as I can tell any new evidence. Thus affecting WPCT.

How can you tell if they have, or have not, got any new evidence of value or lack of value?

Do you have the business plans to show if they are ahead or behind plan and what specifically they are researching or funding right now?

Do you have the latest management accounts?

Have you sat along Woodford in discussions with potential acquirers of his stake to understand what they might be willing to pay, or how they would value it if they were to take over funding the business?

What is your personal / professional relationship with Link that you would normally expect them to give you the detailed mechanics of the valuation model and now you are upset that you can't tell how they have done it this time?

I suggest the answer to all that is no, you don't know what is going on, and you don't usually either, so they aren't conducting themselves differently for this particular valuation and there is nothing special resulting in you not having the intimate details of the valuation, as you never normally get such details.

So, given you don't know what is going on within that private company, and you are not involved in the valuation process, and not au fait with valuing equity stakes in private venture capital businesses anyway, how can you say they have no evidence for what they are doing?

Sorry for the rant.

As you can see from the WPCT share price vs its published NAV, and the fact that the share price fell much less than the fall in the published NAV, many people did not think the NAV of certain private holdings were credible.

Some no doubt felt that IH should not have been marked up last time around anyway, to the enterprise value implied by what IH's investors were paying in the last funding round. Some quite vocal commentators think the value of a strategic stake in this particular research company should just be valued at zero, because a Google search would tell them that all the lines of enquiry for things that the company might try to research will all become dead ends.

If Link do their periodic review of the private company valuations and decide to continue to hold at the carrying value from last time around, the people who think it should be valued at nil will be very angry. If they write it off, other people will be angry. If they write it half off, the cynics will say they are just trying to be crowd pleasers and are writing it half way off now and plan to write off the rest later. Basically Link are damned if they do and damned if they don't. Someone is going to have a rant either way. Today it was your turn.

Moe_The_Bartender

Alexland wrote: »

From what we know so far about the truckers, overstating their operating profit by 4% is hardly going to take the company down so for Woodford this is one of his better problems.

Alex

Maybe but it depends on what the share price is when the suspension is lifted.

AnotherJoe

bowlhead99 wrote: »

Basically Link are damned if they do and damned if they don't.

Given their history and recent behaviour, that sounds entirely fair

dividendhero

Alexland wrote: »

From what we know so far about the truckers, overstating their operating profit by 4% is hardly going to take the company down so for Woodford this is one of his better problems.

Alex

It's not so much the amount, if fiddling the books investors wonder what other nasties have been hidden

AnotherJoe

Thought experiment for BH.
I will lend you at zero percent interest for 3 months, £50m.
With that, you can only purchase the WPCT investment in IH but you are getting it at a bargain price, £20m off at £50m not Links valuation of £70m.
You have to pay me back the £50m within 3 months after you've resold IH.
Failure to pay me back the full £50m means you have to make up the shortfall from your not inconsiderable private wealth up to and including bankruptcy.
Would you take the deal ?

bowlhead99

AnotherJoe wrote: »

Thought experiment for BH.
I will lend you at zero percent interest for 3 months, £50m.
With that, you can only purchase the WPCT investment in IH but you are getting it at a bargain price, £20m off at £50m not Links valuation of £70m.
You have to pay me back the £50m within 3 months after you've resold IH.
Failure to pay me back the full £50m means you have to make up the shortfall from your not inconsiderable private wealth up to and including bankruptcy.
Would you take the deal ?

Of course I would not take the deal.

The investment in a research company by Woodford is a foot-in-the-door, an establishment of a position to be close to research, which may or may not lead to future opportunities to invest more at the appropriate time. If I had ten billion, perhaps I could drop half a percent of it into IH alongside some other punts of similar magnitude; potentially one of them might come off or give me an opportunity or two within the next couple of decades to invest £200-500m in a closer-to-commercialisation development, which I could syndicate out rather than fully self-fund, and profit greatly.

So, it's the sort of thing that an investor with billions of dollars for an initial purchase and deep pockets for follow-on opportunities over an unknown timescale, might go for. Having seeded some research, it may be my kids rather than me, who end up sharing the spoils.

In a fund context, as I've said before, if a fund is going to deliver results over a multi-decade period, it doesn't need to have all its money exclusively in companies delivering a high level of income right now, or a high level of profits right now, or something that can definitively be easily flipped on to another like-minded investor in six months' time. It can have a mix of holdings.

You might think, if Woodford is running an income fund and a patient capital fund, and investors in each of them will want to see some returns at some point, what the hell is he doing investing a small portion of his overall capital in something without a quick payoff? Well, his funds did have the potential to run for decades, before unfortunately the money started to get pulled, which he probably didn't forsee five years ago.

So something with a low chance of any immediate reward, but contextualised as also having option value - some sort of chance to create potential dealflow in future - might have been something a fund manager could rationalise, even though it was more likely than not to be a money loser. VC funds invest in whole portfolios of things that are perhaps individually quite likely to fail but with a long timescale and broad set of opportunities, something will succeed and cover the losses. Woodford is not a VC house, and is not going to buy 200 x 0.5% punts. However, he is open to the potential long term risk/reward of some private capital deals.

But no, I would not take a your deal. Investing in bluesky research for a chance to commercialise it in the future at a cost of tens more millions of risk capital, is something you can do as a huge permanent capital fund or as the head of a multi-billionaire's family office, with a multi decade timescale. Whereas for someone who only has a few hundred grand of net worth: borrowing £50m from Joe with a requirement that you buy a research company and flip it on within three months because you have to pay the £50m back in that timescale, would be bonkers, even if the research company might be worth a present value of £100m to you if you'd been able to keep it for decades.