This AIM IT share has been subject to a severe sell-off as a result of the Woodford debacle and the forced liquidation of assets. At 24p it is now at about a 50% discount to NAV and is an excellent entry point both for the eventual reduction of the discount as the share overhang is worked off and the underlying prospects of the holdings and the asset management business.
See here for example: https://www.ii.co.uk/analysis-commentary/woodford-aim-shares-patient-investors-should-monitor-ii509564
and here for a detailed analysis of the company: https://www.edisongroup.com/publication/scaling-regional-powerhouse/24555/
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Mercia Asset Management
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- Lemon Slice
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Re: Mercia Asset Management
Nocton
What you say is correct but how reliable is their NAV ?
Given that they own mainly unquoted assets they are valued generally at last fund raise.
The realisable value may well bear no resemblance to last raise, of course. Their business model is interesting, getting investors to buy into EIS co's which if they succeed for year or two Mercia may make an investment themselves, whilst charging asset management fees to the original investors. My problem with them though is that even after the lumpy sale announced Friday evening Link still has about 20% of Mercia as Woodford could only sell around 5% and his ex colleague, Barnett has sold Friday but he also appears to have 20% left so that looks like 40% of the stock is on the block still, and has been for a while.
Another point to make is why, with Woodford & Barnett controlling almost 55% of Mercia's equity that the Mercia board shared a Chair (Searle) for some years with WPCT ? Even by the limited standards of AIM co's that is, imo, a long way from best practice, so the issue is, how smart are the Mercia management really ?
What you say is correct but how reliable is their NAV ?
Given that they own mainly unquoted assets they are valued generally at last fund raise.
The realisable value may well bear no resemblance to last raise, of course. Their business model is interesting, getting investors to buy into EIS co's which if they succeed for year or two Mercia may make an investment themselves, whilst charging asset management fees to the original investors. My problem with them though is that even after the lumpy sale announced Friday evening Link still has about 20% of Mercia as Woodford could only sell around 5% and his ex colleague, Barnett has sold Friday but he also appears to have 20% left so that looks like 40% of the stock is on the block still, and has been for a while.
Another point to make is why, with Woodford & Barnett controlling almost 55% of Mercia's equity that the Mercia board shared a Chair (Searle) for some years with WPCT ? Even by the limited standards of AIM co's that is, imo, a long way from best practice, so the issue is, how smart are the Mercia management really ?
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- Lemon Slice
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Re: Mercia Asset Management
What you say is correct, barchid, but as in all investments there is some risk. IMO the downside risk is low. For what it's worth Simon Thompson in Investors Chronicle agrees: https://www.investorschronicle.co.uk/comment/2019/10/31/exploit-a-glaring-valuation-anomaly/
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- Lemon Slice
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Re: Mercia Asset Management
Nocton
I would respectfully point out that ST from the IC has been a supporter of this stock for a long time, memory tells me it was 50 or 60 when he first proposed it.
I agree, of course, that the risk today is half what it was when it was 50p, but the question is, what is the nav ?
It could be very conservative, but the nature of these unquoteds means that with the best will in the world they are very difficult to evaluate which is precisely why all PE / VC unquoteds trusts trade on a discount, as a general rule.
My real concern is, why would the BoD be happy with 2 owners (not entirely unconnected!) holding over 50% for a long time & simultaneously share a Chair with one of them, does that not raise alarm bells to you ?
I would respectfully point out that ST from the IC has been a supporter of this stock for a long time, memory tells me it was 50 or 60 when he first proposed it.
I agree, of course, that the risk today is half what it was when it was 50p, but the question is, what is the nav ?
It could be very conservative, but the nature of these unquoteds means that with the best will in the world they are very difficult to evaluate which is precisely why all PE / VC unquoteds trusts trade on a discount, as a general rule.
My real concern is, why would the BoD be happy with 2 owners (not entirely unconnected!) holding over 50% for a long time & simultaneously share a Chair with one of them, does that not raise alarm bells to you ?
Re: Mercia Asset Management
The company has undertaken a conditional placing of new shares to raise c.£30 million at 25p per share, representing a 21.9% discount to the closing price on the day before the announcement (and a 40% discount to NAV). £12m is to part-fund the £25m acquisition of the VCT fund management business of NVM Private Equity (plus £2.6m transactional costs!) and £15m is capital for further acquisitions.
Although shareholder-directors have participated in the placing, existing shareholders were not offered the chance to take part and thus will be substantially diluted, as the new shares comprise nearly 40% of the current issued share capital.
Although the share issue is subject to shareholder approval at a General Meeting on 20 December, I hold no great expectation that it will be rejected. I have lost any faith that the company will deal fairly with its minority shareholders and I've therefore disposed of my holding in the company, thankfully at a loss of only £36.
I note that Simon Thompson of IC has today recommended selling.
Although shareholder-directors have participated in the placing, existing shareholders were not offered the chance to take part and thus will be substantially diluted, as the new shares comprise nearly 40% of the current issued share capital.
Although the share issue is subject to shareholder approval at a General Meeting on 20 December, I hold no great expectation that it will be rejected. I have lost any faith that the company will deal fairly with its minority shareholders and I've therefore disposed of my holding in the company, thankfully at a loss of only £36.
I note that Simon Thompson of IC has today recommended selling.
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- Lemon Slice
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Re: Mercia Asset Management
Nocton
A wise move in selling, I note that with the recent fall in the price to last nights 24.3 p the board have wasted no time in awarding themselves even more options at a strike price of 24.3p as per their RNS this morning.
Any thoughts people may have had that the board were not running this company for their own benefit will surely disappear now ?
A wise move in selling, I note that with the recent fall in the price to last nights 24.3 p the board have wasted no time in awarding themselves even more options at a strike price of 24.3p as per their RNS this morning.
Any thoughts people may have had that the board were not running this company for their own benefit will surely disappear now ?
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