Numis warns of upcoming NAV weakness for VSL
VPC Speciality Lending (VSL) is expected to report a lower net asset value (NAV) for the month of November after one of its newest holdings saw its share price drop by approximately 70 per cent.
Analysts at Numis have warned VSL shareholders that they are unlikely to see a repeat of October’s 14.4 per cent NAV.
That return was largely driven by capital returns on VPC Impact Acquisition Holdings, a special purpose acquisition company (SPAC) which completed its business combination with digital asset manager Bakkt. VPC Impact Acquisition contributed 16.18 per cent to VSL’s NAV in October.
However, during the month of November, Bakkt’s share price dropped dramatically, due to volatility in the cryptocurrency market and weaker than expected third quarter results. By the end of October, Bakkt had a valuation of $89.7m (£67.75m), but this had been revised to $61.8m by the end of November. Since then, Bakkt shares have fallen a further 16.5 per cent.
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Numis has estimated that Bakkt’s underperformance will have reduced VSL’s NAV by as much as seven per cent.
“VPC Speciality Lending was launched as a private debt fund, but has invested in a number Victory Park SPACs which has given it attractive economics in the sponsor equity/warrants, driving returns, albeit introduced a significant amount of volatility to the NAV,” Numis brokers said.
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“We estimate the NAV is down [by approximately] seven per cent, adjusted for the Bakkt price and fee write-back. However, we note that this is based on the spot share price moves for Bakkt, whilst the fund may continue to use an average figure. The shares are trading at 93.0p which represents a 21 per cent discount to our estimated NAV.
“We believe this offers value in the medium term, albeit the November NAV is likely to be weak and the risk profile has significantly changed, with one holding representing c.20 per cent of net assets, meaning investors may need to adjust expectations of the risk profile of the fund.”
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