Approximately £85m of Honeycomb Investment Trust’s stock was sold yesterday, as investors took advantage of a share buy-back programme which valued the trust at 850p per share – a 16 per cent discount to December’s net asset value of 1014.9p.
The sell-off represents approximately one quarter of the fund’s portfolio. While the company has announced that it will buy back up to 2.2 million shares, brokerage Numis has reported that approximately 10 million shares had been sold by the end of trading last night.
“The announcement essentially gives the company time to seek to place out the stakes held by selling shareholders,” said Numis research. “The placing will inevitability attract value investors and depending on the nature of buyers it is likely to bring the future of the fund into question.
“A potential catalyst for value investors has recently been removed after the continuation vote, due in 2021, was brought forward to December 2019. Shareholders approved continuation, although clearly had an eye on a different exit mechanism, rather than a protracted wind-down.”
Numis analysts have pointed out that Honeycomb has “an extremely concentrated shareholder register”, with the three largest holders representing approximately 75 per cent of share capital.
The largest shareholders, according to Bloomberg, are Invesco with a 36 per cent stake and Old Mutual with 23 per cent, as well as Link (funds previously managed by Woodford Investment Management) which had an 18 per cent stake, prior to yesterday’s announcements.
Numis has speculated that the selling shareholders include Invesco and Link. Invesco has been under pressure to reduce its illiquid holdings, while Link/Woodford is in the process of realising its portfolios.
Honeycomb is managed by Pollen Street Capital, which also handles the Pollen Street Secured Lending (PSSL) investment trust. Rumours of a merger between Honeycomb and PSSL recently resurfaced, after Numis released a broker note calling for Pollen Street Capital to revisit the idea.
Earlier this month Honeycomb announced that it had ended 2019 with a monthly NAV return of 0.67 per cent, taking its annual performance to 7.79 per cent.