Neil Woodford's plan to calm furious shareholders
Under pressure from investors, regulators and politicians, Woodford's team announces its plan of action.
28th June 2019 12:02
by Faith Glasgow from interactive investor
Under pressure from investors, regulators and politicians, Woodford's team announces its plan of action.
Following discussions with shareholders, the Woodford Patient Capital Trust (LSE:WPCT) board plans to address a number of concerns, including gearing levels, the share price discount to net asset value (NAV) and "ongoing developments"Â at Woodford Investment Management.
Gearing on WPCT as at 26 June equated to 16.8% of NAV; the trust's ability to borrow is capped at 20%. Plans have been announced to reduce this to under 10% within six months and to be "generally operating ungeared"Â within 12 months.Â
Thereafter, gearing will be reserved for facilitating short-term capital flexibility, and will require board approval for any borrowing above 10%.Â
Additionally, as some of the largest investments in the trust mature, the board intends to use proceeds from the sale of some of these to lend to less mature holdings in need of funding. Expect "a number"Â of disposals or realisations over the next 12-18 months.
The discount to NAV has widened dramatically during June as a result of events surrounding the Woodford Equity Income fund, more than doubling from 14% at the end of May to 33% by 26 June.Â
Source: TradingView Past performance is not a guide to future performance
The board has announced that if reduced gearing does not help to reduce this, it will start buying back shares to bring it down.
Extra controls have also been introduced to improve visibility of exactly what is going on within the portfolio and protect the value of WPCT's assets. The board will now have advance oversight of any sales of assets also held in other Woodford portfolios, and of any further investments into new or existing holdings.Â
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The WPCT board is keen to stress its independence from Woodford and his team, and highlights the fact that "there are robust processes in place to avoid any conflicts of interest. It has a blend of experience including investing in and working with early-stage companies."
It adds that it is "closely monitoring the situation and continues to have regular dialogue with the portfolio manager".Â
A Woodford spokesperson says:
"We remain in close contact with the board and are aligned in delivering shareholder value in accordance with the investment objective of the trust."
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
These articles are provided for information purposes only. Â Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. Â The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.