As previously communicated, the Company’s board perceives its large and persistent discount to NAV as one of its biggest challenges to scale up its investment operations, while also constituting its largest upside potential to address. However, after multiple years of work to reduce the discount within the current structure (including persistent and costly IR-activities; expanded, continuous and detailed reporting on individual holdings along with their respective NAVs; announcements of divestitures at valuation levels meaningfully above NAV; etc.), the board can conclude that the current structure is not suitable for investments into early stage companies in
Therefore, the board has evaluated several approaches for maximizing the public shareholder value in the current portfolio. As an outcome, the overarching goal has been set to liquidate the current portfolio in such a manner that the company can return cash and/or publicly traded shares to its shareholders that in total can come as close as possible to the current portfolio NAV. The current ongoing liquidation of the Group’s public equity portfolio, as well as the divestiture process in DragonLend constitute initial steps in this direction. The board will also consider other offers for whole or parts of the portfolio. The remainder of the proceeds can be re-invested into more mature and later stage digital companies, which are deemed more suitable to be held in the current listed structure as they would likely trade with lower/no discounts as they could be valued based on generated free cash flows (rather than estimated future exit values).
During the period which the current portfolio is in the process of being liquidated, the Company will also seek to minimize its central operational expenses by meaningfully reducing costs for central overhead and the investment team. As
With a new reduced cost base, the board can allow the required time to liquidate the holdings - the process may take several years in order to not negatively impact shareholder values. After implementing recently planned cost reductions, the company expects to have a runway well through 2024 without raising new external capital.
"We have been working on the topic of eliminating the discount to NAV for a number of years and by now I believe we have collected enough data and experiences to confidently conclude that this problem is structural for our company and companies of our size with similar activities. Our specific issue might also be further aggravated by the fact that our operations are centered in
On a positive note, I am happy that we now have taken this decision to embark on a concrete path to maximize the total liquid shareholder value close to our total current NAV. If we succeed, we would be delivering a >4x total return on capital invested on the holdings that we now have in the portfolio and offer a >100% upside from current share price.”, says
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