Son of 'Patient Capital': stick or twist?

Voyager2002

Opinions please,

Many of you will remember the former star manager Neil Woodford, and his 'Patient Capital' investment trust. I was suckered in, and after his downfall this IT has undergone a couple of changes of name and objectives, and has now begun moving towards voluntary liquidation. My holding currently trades for about ten per cent of my original investment. Fortunately it is a small proportion of my portfolio and I have no immediate need for cash. 

Anyway, investors have been invited to "tender" up to one fifth of their holding. If the tender is accepted, these shares will be sold back (and cancelled) for an undisclosed sum. What should I do? Is there any chance that the shares will eventually become worth more than a realistic tender amount, or is this the beginning of a slippery slope?

Hoenir

Holding shares in the vain hope that one day your lost capital will be restored is normally a fruitess exercise. Far better to take the loss on the chin. Take the money and reinvest it elsewhere where you've identified better opportunties. 

The more often you crystalise losses. The easier it becomes. Not all investments are going to be highly profitable. Little point getting het up about it. Far better to move on. 

EthicsGradient

I'm in the same position as the OP (how I wish I'd followed my first instinct to bail the first time I read the words "cold fusion"). We can tender our entire holdings if we wish, but it'll be cut down pro rata to be a maximum of 21% of shares - I've tendered all of mine just to get what I can when I can, since I can't see a recovery for the trust now that the closing down process has begun (since mine are on a platform, how that'll work for me in practice is still a little unsure - the end results of similar choices in the past have never quite been explained, because you don't know what your fellow platform members wanted, or how the aggregate tender was handled by the main company)

friolento

I have bitten the bullet this morning and sold all of mine. 

Voyager2002

Hoenir said:

Holding shares in the vain hope that one day your lost capital will be restored is normally a fruitess exercise. Far better to take the loss on the chin. Take the money and reinvest it elsewhere where you've identified better opportunties. 

The more often you crystalise losses. The easier it becomes. Not all investments are going to be highly profitable. Little point getting het up about it. Far better to move on. 

Very true, but not terribly relevant.

In this, I am being invited to sell some of my shares "at a price to be determined". I have no idea whether that price will be higher or lower than the current market price, and once I know the price, it will be too late to withdraw from the deal. As the winding-up process proceeds, the price offered will presumably rise or fall in relation to Net Asset Value: I wish could guess in which direction it will move.

the_seer

The Tender Offer Circular states "the Final Tender Price would be 21.119983 pence per Share...subject to any events in the Company's portfolio prior to 18 July, which would lead to a material change in the Company's Estimated Net Asset Value per Share".
And the update on 11 July stated "The Board is not currently aware of any reason why the Final Tender Price would differ from the Indicative Tender Price."
So unless something in their portfolio goes bust or gets taken over in the next 3 days, you'll be getting 21.119983p.
With the current SP under 16p, it's a no brainer to tender your entire holding. If you hold within a nominee account, then you are likely go get (significantly) more than the 21.42% on offer, due to other shareholders ignoring the tender.

friolento

the_seer said:

The Tender Offer Circular states "the Final Tender Price would be 21.119983 pence per Share...subject to any events in the Company's portfolio prior to 18 July, which would lead to a material change in the Company's Estimated Net Asset Value per Share".
And the update on 11 July stated "The Board is not currently aware of any reason why the Final Tender Price would differ from the Indicative Tender Price."
So unless something in their portfolio goes bust or gets taken over in the next 3 days, you'll be getting 21.119983p.
With the current SP under 16p, it's a no brainer to tender your entire holding. If you hold within a nominee account, then you are likely go get (significantly) more than the 21.42% on offer, due to other shareholders ignoring the tender.

I got £15.71 at HL

the_seer

If you sell in the market before the tender, then you are obviously missing out on the opportunity to get 21.12p on 21.42% (or more) of your holding by participating in the tender!

EthicsGradient

the_seer said:

If you sell in the market before the tender, then you are obviously missing out on the opportunity to get 21.12p on 21.42% (or more) of your holding by participating in the tender!

But presumably the current market price takes that into account; after the right to tender your shares expires, we can expect a drop in the market price, when you would be buying/selling the trust containing only less tradable assets it'll take them longer to find buyers for. As you said earlier, on a platform you may get to sell more than 21% because of other holders not responding to the tender offer; but I don't feel like trying to take advantage of that by buying more now.

Hoenir

Voyager2002 said:

Hoenir said:

Holding shares in the vain hope that one day your lost capital will be restored is normally a fruitess exercise. Far better to take the loss on the chin. Take the money and reinvest it elsewhere where you've identified better opportunties. 

The more often you crystalise losses. The easier it becomes. Not all investments are going to be highly profitable. Little point getting het up about it. Far better to move on. 

Very true, but not terribly relevant.

You opt not to tender shares in the expectation that future realisations of the portfolo will be more beneficial. 

Likewise you could have sold your shares in the open market previously.  Bottom line is that many people have an ingrained dislike of crystallising losses. Understanding you own emotions goes a long way to becoming a better investor. Whose not afraid to make decisive bold calls. 

Voyager2002

Hoenir said:

Voyager2002 said:

Hoenir said:

Holding shares in the vain hope that one day your lost capital will be restored is normally a fruitess exercise. Far better to take the loss on the chin. Take the money and reinvest it elsewhere where you've identified better opportunties. 

The more often you crystalise losses. The easier it becomes. Not all investments are going to be highly profitable. Little point getting het up about it. Far better to move on. 

Very true, but not terribly relevant.

You opt not to tender shares in the expectation that future realisations of the portfolo will be more beneficial. 

Likewise you could have sold your shares in the open market previously.  Bottom line is that many people have an ingrained dislike of crystallising losses. Understanding you own emotions goes a long way to becoming a better investor. Whose not afraid to make decisive bold calls. 

Agreed.

Clearly, this particular IT has no long-term future, so any hopes that its shares will one day soar if the cold fusion company ever gets the technology to work (!) are now clearly fantasy. The only questions are whether the tender price is good when compared with the current market price (clearly it is) and whether it represents good value in relation to the assets held by the Trust. On this latter question, the Oak Bloke suggests that it represents rather poor value: https://theoakbloke.substack.com/p/the-inov-tender-offer