I would guess the market values these private companies so low is because, generally, they are high risk and despite maybe having ground breaking technology they often fail. Commercial fusion is still way off in the distance (I’d say even 20 years is optimistic). Out of all of them Hinge looks like a decent prospect, especially as they are in the US health market which is huge and awash with money!
High risk would be the common perception Ian. But I've gone through the annual reports 2020-2023 and either IP group are being very cute about hiding failing investments, or there's not been a single failure in four years. Reductions in value, yes, but nothing to zero. Do you have any examples of its portfolio companies you could share? I'm struggling to find any, let alone many (if they often fail you'd expect many).
It wasn’t aimed at specific companies but more a general statement on early stage startups. Many eventually fail despite talk of amazing new products and big customers on the horizon. That’s why they are often valued low as it’s risky. The value will only change once there’s evidence of actual sustainable commercialisation (unless it becomes a hyped technology in which case it will probably soar and then drift back down again)
The hype around fusion has now died down as people have finally realised the result was important but that there are still massive engineering hurdles to overcome and it’s decades away.
Hi OB, hope you are well. Thanks for your details on IPO; I have been a long term fan of their thesis, to commercialise scientific research, and truly believe they are an astute bunch; but I've turned cold on them, not because of an ignorance that what they do requires patience for fruition, inherent concern of their investments, because I fundamentally disagree on one of the strands you purport to illustrate focus - buybacks. IPO answers to questions in their presentation, showed an aloofness and disconnect. In explaining their decision of buybacks over dividends, they highlighted this reflected investor feedback, name checking RPS (their major shareholder) and PHNX (a major cash I hector investor). Despite, have a various and respected shareholder register, this spoke to me of a complacency. Yes, to other (small) investors, but that because their major shareholder, and their current major financial inputter where happy, they didn't need to focus with ANY urgency on fiscal return of their commercialisation. Whilst at such a NAV discount, buybacks are obviously accretive, frankly when you are at an 80% discount gaining 5 base points on that, pushed forever down the line to realisation, deflated investors like me, that are happy to be patient, happy to ignore short / medium SP drops, but want some crumbs to feed our patience/believe, that IPO's purpose is to make money whilst making life enhancing investments. Without those crumbs, the tunnel vision of only considering your major shareholder/funders, at this point in time, shows a disregard to those who have been, invested, believed, for a long time. It says to me that this is a mgmt that's pandering to such, not for profit of all the shareholders but to propagate the pet projects, careers, of scientists. And I haven't checked the renumeration of mgmt, but doubtlessly that to.
At a very base level, the dividend (,at the previous level), instilled a focus to commercialise and profitise, the buybacks don't because it has a maximum but no minimum, hence discretionary.
Couple of positives - net cash increased. And I think not only will Hinge return profits imminently, but handsomely, and growingly into the future.
Thanks for your note and hope you are well too. It was interesting to get your perspective. Buy backs certainly provoke a range of responses. The fact they drive up the NAV is what interests me most.
As to the alignment of management, the CEO and CFOO appear to receive around 50% of remuneration through a LTIP/RSP which is based on outperforming the FTSE250 and an 8% threshold. The LTIP has a three year delay and is contingent on the NAV being above 100% of the value on the award date.
In the latest remuneration report they take a 4% pay rise, and lost a large chunk of their bonus due to the falls in the IPO share price. So while their base salaries of £0.5m and £0.3m aren't small they certainly aren't excessive (for a FTSE250 with >£1bn assets). I watched a presentation from Serinus Energy and their MD earns more salary and they eke out 500 barrels of oil eq. per day. There actually appears to be strong alignment based on the Director's remuneration report.
I must admit I don't see a complacency or lack of urgency from them. Nor do they strike me as a bunch of geeks running the show, spending money, and caring nothing for money, just empire building. I watched the same presentation and would say frustration is the main emotion they appear to exhibit and guarded excitement that improvement can arrive.
Scottish Mortgage are up a third from their recent lows...... They are throwing a large chunk at buy backs £1bn.... 5X pro rata more than IPO!
Hi OB, thanks for your view. And particularly mgmt renumeration/incentives. I was going to check that, but you beat me to it (thanks), as disproportionate/unwarranted reward does irk me, and raise my antenna! And I agree that the base salary is fine - I'd even argue on the low side. On the focus, we are going to have to agree to disagree, I think it's primarily on science (great for wider society) and not profit (for the smaller shareholders). I feel it's desire is to become the new Welcome Trust, using it's listing/shareholders to replace grant funding. Just a feeling, a hunch, but I've been here a few years and never felt such before. The feel I got from the presentation/dial-in was monopolistic, existng in a bubble. And whilst I'm patient, inherently believe that they will come good, I just felt that good would never materialise to you or me. I've never sold a share - but that dial in so unsettled my confidence that I'm considering selling out. That's my strength of feeling.
I would guess the market values these private companies so low is because, generally, they are high risk and despite maybe having ground breaking technology they often fail. Commercial fusion is still way off in the distance (I’d say even 20 years is optimistic). Out of all of them Hinge looks like a decent prospect, especially as they are in the US health market which is huge and awash with money!
High risk would be the common perception Ian. But I've gone through the annual reports 2020-2023 and either IP group are being very cute about hiding failing investments, or there's not been a single failure in four years. Reductions in value, yes, but nothing to zero. Do you have any examples of its portfolio companies you could share? I'm struggling to find any, let alone many (if they often fail you'd expect many).
It wasn’t aimed at specific companies but more a general statement on early stage startups. Many eventually fail despite talk of amazing new products and big customers on the horizon. That’s why they are often valued low as it’s risky. The value will only change once there’s evidence of actual sustainable commercialisation (unless it becomes a hyped technology in which case it will probably soar and then drift back down again)
The hype around fusion has now died down as people have finally realised the result was important but that there are still massive engineering hurdles to overcome and it’s decades away.
Ian mears; fair comment that. And specifically agree Hinge is the only one I see producing profits soon.
Hi OB, hope you are well. Thanks for your details on IPO; I have been a long term fan of their thesis, to commercialise scientific research, and truly believe they are an astute bunch; but I've turned cold on them, not because of an ignorance that what they do requires patience for fruition, inherent concern of their investments, because I fundamentally disagree on one of the strands you purport to illustrate focus - buybacks. IPO answers to questions in their presentation, showed an aloofness and disconnect. In explaining their decision of buybacks over dividends, they highlighted this reflected investor feedback, name checking RPS (their major shareholder) and PHNX (a major cash I hector investor). Despite, have a various and respected shareholder register, this spoke to me of a complacency. Yes, to other (small) investors, but that because their major shareholder, and their current major financial inputter where happy, they didn't need to focus with ANY urgency on fiscal return of their commercialisation. Whilst at such a NAV discount, buybacks are obviously accretive, frankly when you are at an 80% discount gaining 5 base points on that, pushed forever down the line to realisation, deflated investors like me, that are happy to be patient, happy to ignore short / medium SP drops, but want some crumbs to feed our patience/believe, that IPO's purpose is to make money whilst making life enhancing investments. Without those crumbs, the tunnel vision of only considering your major shareholder/funders, at this point in time, shows a disregard to those who have been, invested, believed, for a long time. It says to me that this is a mgmt that's pandering to such, not for profit of all the shareholders but to propagate the pet projects, careers, of scientists. And I haven't checked the renumeration of mgmt, but doubtlessly that to.
At a very base level, the dividend (,at the previous level), instilled a focus to commercialise and profitise, the buybacks don't because it has a maximum but no minimum, hence discretionary.
Couple of positives - net cash increased. And I think not only will Hinge return profits imminently, but handsomely, and growingly into the future.
Hi Damien,
Thanks for your note and hope you are well too. It was interesting to get your perspective. Buy backs certainly provoke a range of responses. The fact they drive up the NAV is what interests me most.
As to the alignment of management, the CEO and CFOO appear to receive around 50% of remuneration through a LTIP/RSP which is based on outperforming the FTSE250 and an 8% threshold. The LTIP has a three year delay and is contingent on the NAV being above 100% of the value on the award date.
In the latest remuneration report they take a 4% pay rise, and lost a large chunk of their bonus due to the falls in the IPO share price. So while their base salaries of £0.5m and £0.3m aren't small they certainly aren't excessive (for a FTSE250 with >£1bn assets). I watched a presentation from Serinus Energy and their MD earns more salary and they eke out 500 barrels of oil eq. per day. There actually appears to be strong alignment based on the Director's remuneration report.
I must admit I don't see a complacency or lack of urgency from them. Nor do they strike me as a bunch of geeks running the show, spending money, and caring nothing for money, just empire building. I watched the same presentation and would say frustration is the main emotion they appear to exhibit and guarded excitement that improvement can arrive.
Scottish Mortgage are up a third from their recent lows...... They are throwing a large chunk at buy backs £1bn.... 5X pro rata more than IPO!
OB
Hi OB, thanks for your view. And particularly mgmt renumeration/incentives. I was going to check that, but you beat me to it (thanks), as disproportionate/unwarranted reward does irk me, and raise my antenna! And I agree that the base salary is fine - I'd even argue on the low side. On the focus, we are going to have to agree to disagree, I think it's primarily on science (great for wider society) and not profit (for the smaller shareholders). I feel it's desire is to become the new Welcome Trust, using it's listing/shareholders to replace grant funding. Just a feeling, a hunch, but I've been here a few years and never felt such before. The feel I got from the presentation/dial-in was monopolistic, existng in a bubble. And whilst I'm patient, inherently believe that they will come good, I just felt that good would never materialise to you or me. I've never sold a share - but that dial in so unsettled my confidence that I'm considering selling out. That's my strength of feeling.