Woodford Concerns

masonic

dividendhero wrote: »

Is Woodford's name on some kind of "sucker list"???

These are the natural consequences for small early stage companies when a significant backer gets into trouble. Expect more of the same in the coming weeks.

Johnnyboy11

Amigo Holdings has had a tough week, down 10%. The Telegraph reported recently that Woodford had roughly halved his holding to circa £60m, so that's another £6m down the tubes...

bowlhead99

Johnnyboy11 wrote: »

Amigo Holdings has had a tough week, down 10%. The Telegraph reported recently that Woodford had roughly halved his holding to circa £60m, so that's another £6m down the tubes...

This can be spun either way because clearly Woodford was smart to exit half of it at a temporary higher price while he could.

Also in the the press today, BCA Marketplace (24% owned by Woodford, Invesco and Hargreave Hale) has received a £1.9bn cash offer from TDR and NB to take it private, so Woodford would liquidate £125m there assuming it goes through.

That's about £30m more than his piece would have been worth three weeks ago. £30m more than covers the loss of 11% over the last month at Amigo and the 70% loss in a day at RM2, put together.

You don't expect to win every battle.

poppy10_2

masonic wrote: »

These are the natural consequences for small early stage companies when a significant backer gets into trouble.

RM2 has been in business since 2007. Hardly early stage. It's just a failed company with a failed business model, that was only being kept alive by regular infusions of cash from Woodford who has spent over £200million on this company that now has a market cap of just £3.5 million. Without him they would (and should) have gone bust years ago. It's only now that he is unable to continue his life support cash that they are finally being put out of their misery

poppy10_2

masonic wrote: »

£30m more than covers the loss of 11% over the last month at Amigo and the 70% loss in a day at RM2, put together.

You don't expect to win every battle.

RM2 had already lost 99% of its value before the latest 70% drop. The £30m is a tiny fraction of how much he has lost on that investment

bowlhead99

poppy10 wrote: »

RM2 had already lost 99% of its value before the latest 70% drop. The £30m is a tiny fraction of how much he has lost on that investment

The quote to which you're replying was mine rather than Masonic's...

Woodford owns most of RM2. As of the December 2018 accounts, RM2 was worth about £2.3m in WPCT's books (0.24%), and £11.6m in WEIF. The combined £14m at December was a tiny fraction of his overall investments. Since then, the shares have lost 7/8ths of their value in about 6 months. Clearly not ideal.

But it is not like we have only just discovered that he has lost a large amount - that news is years old. He had already lost a large amount up to the end of last year and only had £14m left in it, with no practical way to exit it. What he has lost since that point six months ago (low double digit millions) is the same order of magnitude as what he has made since the same date on BCA.

My comment wasn't to suggest that he hadn't made some bad investments. Merely that when you are looking at things falling in value over a short time frame, there are generally also things going in the other direction. BCA seems to have been a solid investment - he bought 7% of it at IPO for 150p and yesterday's cash offer is over 240p, so a little over 12% annualised return in the 4.25 years since buying in.

masonic

poppy10 wrote: »

RM2 has been in business since 2007. Hardly early stage. It's just a failed company with a failed business model, that was only being kept alive by regular infusions of cash from Woodford who has spent over £200million on this company that now has a market cap of just £3.5 million. Without him they would (and should) have gone bust years ago. It's only now that he is unable to continue his life support cash that they are finally being put out of their misery

I haven't really researched the company, but according to its own account of its history, it started out purely doing research and it wasn't until after 2011 that it started trading. It is true that 'early stage' can refer to a company that's been trading for less than 3 years, and 2011-2019 is almost three times that long, but I was using it in the sense that it was unprofitable and had not yet achieved market penetration. I make no comment as to whether it ever would have.

jamei305

bowlhead99 wrote: »

You don't expect to win every battle.

The manager of a large equity income fund shouldn't be involved in any battles to offload stakes in small companies.

AnotherJoe

Well, its not so large now
Surely this fund is a dead man walking? If they take the gate off there will be a rush for the exits which will immediately put them back where they were in respect of 10% liquidity.

So either they apply a buy / sell difference to dissuade sellers (same as was done with REITs a few years back until the dust settled but I'm thinking it would need to be massive to dissuade most sellers) or acknowledge its over, close it down and return whats left, which would mean they could have a more leisurely fire sale and eventually return more.

gadgetmind

The big issue is what valuations are placed on the illiquid holdings. Too high and any running for the exits will be effectively subsidised at the expense of holders, too low (so heading towards honest?) and it will cast doubts on the holdings in WPCT etc.

I'd expect that there are ongoing discussions with large holders to see what's required to keep them onboard.

Hmmm, another option would be to convert to close ended! The whole lot could be moved into a trust and those previously holding the OEIC units would be issues with shares.