11th August 2015
Neil Woodford’s hugely popular Patient Capital investment trust is to issue new shares to meet market demand and to manage its hefty premium.
The investment trust is currently trading at a double-digit premium of some 15% above the portfolio’s net asset value.
The amount to be issued could be as much as 10% of the share capital – around £80m though it is yet to be clarified how many new shares will be issued and whether retail investors will be involved.
On the back of the news, its share price fell 3%. The announcement accompanied the trust’s half-year report.
The company raised £800m in an oversubscribed initial public offering and three-quarters of this is expected to be fully invested by year end.
The portfolio has increased its net asset value per share by 3.1% since admission to the end of June.
Laith Khalaf, senior analyst, Hargreaves Lansdown: ‘Woodford is opening the door to new capital being squeezed into his investment trust. New shares will be issued at a price above the Net Asset Value of the trust, but below the market price, giving new investors a sweetener while building up the underlying value of the fund.
“This move will exert downward pressure on the premium and, in the short term, the share price. However existing shareholders stand to benefit from the extra cash harvested from new investors, provided it is put to good use.”
As expected, the portfolio already has a significant weighting to emerging technology and science innovation. “Woodford has a wide mandate to invest across sectors, but is particularly excited about the long-term potential of smaller, earlier-stage UK pharmaceutical businesses,” noted Nicolas Ziegelasch, head of equity research, at Killik & Co.
But he also holds some blue chip names too, including AstraZeneca and GlaxoSmithKline, which have hindered rather than helped performance to date added Khalaf.
He said: “Investors are already sitting on a 15% profit, but so far this has largely been driven by the popularity of the trust itself, rather than a result of hard yards gained by the underlying companies.”
Neil Woodford, head of investment, Woodford Investment Management, said: “Since April’s launch, we have been actively building the portfolio and it is already taking shape. Initially, our activity was focused towards building exposure to the mid and large capitalisation businesses that account for about a quarter of the portfolio.
“We are pleased with the shape of the portfolio and by the positive, albeit early, net asset value progression. More importantly, we are pleased with the operational progress being made by our investee companies and very excited by the long-term potential that they collectively represent.”