REG - Chrysalis Invs Ltd - Proposed Placing

Chrysalis InvestmentsAnnouncement

01/12/2021 07:00

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RNS Number : 1182U  Chrysalis Investments Limited  01 December 2021

The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any
member state of the European Economic Area (other than to professional
investors in Belgium, Denmark, the Republic of Ireland, Luxembourg, the
Netherlands, Norway and Sweden), Canada, Australia, Japan or the Republic of
South Africa.

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit)
Regulations 2019.

 

This announcement is an advertisement and does not constitute a prospectus and
investors must only subscribe for or purchase any shares referred to in this
announcement on the basis of information contained in the prospectus dated 10
March 2021 (the "Prospectus") published by Chrysalis Investments Limited (the
"Company") and not in reliance on this announcement. This announcement does
not constitute and may not be construed as, an offer to sell or an invitation
to purchase, investments of any description, or a recommendation regarding the
issue or the provision of investment advice by any party. No information set
out in this announcement or referred to in other written or oral form is
intended to form the basis of any contract of sale, investment decision or any
decision to purchase shares in the Company.

 

1 December 2021

Chrysalis Investments Limited

("Chrysalis" or the "Company")

Proposed Placing

 

The Company today announces its intention to raise new capital under the
Company's placing programme, as detailed in the Company's Prospectus dated 10
March 2021, through a placing (the ("Placing") of Ordinary Shares at a price
of 238 pence (the "Issue Price"). The Issue Price represents a 1.7 per cent.
premium to the pro forma Net Asset Value per Ordinary Share of the Company as
at 30 November 2021 of 234 pence (the "NAV")*.

In conjunction with the Placing, there will be an offer made by the Company on
the PrimaryBid platform of additional Ordinary Shares at the Issue Price (the
"Retail Offer") to provide retail investors with an opportunity to participate
in the equity fundraising alongside institutional investors. A separate
announcement will be made shortly regarding the Retail Offer and its terms.
For the avoidance of doubt, the Retail Offer is not part of the Placing.

 

*The proforma Net Asset Value per Ordinary Share: (1) has been calculated
using valuations of unlisted investments as at 30 September 2021 (as adjusted
for foreign exchange movements to 30 November 2021), (2) has been calculated
using the mid-market closing prices of listed investments as at 30 November
2021, and (3) includes transactions concluded in the portfolio between 30
September 2021 and 30 November 2021 at cost and therefore uses the Company's
cash balance as at 30 November 2021.

 

Background and rationale for the Placing

Since raising £300 million in March 2021, the late-stage private market has
exhibited strong growth and Chrysalis has continued to experience significant
interest in its crossover proposition. At the time of the fundraise, the
Investment Adviser outlined a strong pipeline of new investment and follow-on
opportunities and set an expectation of adding one to three new units per
annum.

Over the summer, origination into the Investment Adviser's new investment
pipeline was considerably stronger than predicted, such that it has added five
new investments to the portfolio since March 2021, significantly outperforming
its earlier expectations. While certain follow-ons were undertaken (e.g.
Starling, wefox and THG), given the quality of the new investment cases, the
Investment Adviser chose to prioritise this channel over the period.

Use of proceeds

The expected use of new funds is primarily to drive the performance of
existing assets in current portfolio companies via certain follow-on
investments. In addition, the current effective number of investments is at
the bottom end of the Investment Adviser's target range of 15 to 20, offering
the opportunity to selectively add new holdings.

Follow-on opportunities: the "Power of Primary Capital"

The Investment Adviser typically sees a strong correlation between its supply
of follow-on capital and the subsequent performance of the investee asset.
This ability and willingness of Chrysalis to back its assets is one of its
attractions to potential investee companies and demonstrates the Investment
Adviser's belief in the "Power of Primary Capital". For example, considerable
amounts of follow-on capital have been devoted to developing both Starling and
wefox over the last two years (approximately £69 million and €60 million
respectively). The revenue performance of both these businesses have been
impressive, demonstrating high CAGRs (c.180% and c.160% respectively since
initial investment) as fresh capital has allowed them to materially expand and
develop their offerings. For Starling, this involved capital to back an entry
into the UK lending market in early 2020, and for wefox this capital has
allowed it to undertake accretive M&A and continue to fund high growth
over the course of 2020.

The growth displayed by these two assets last year drove significant investor
interest and was fundamental to the success of the substantial funding rounds
they both undertook in 2021, and underpinned the material increase in
valuations the companies achieved.

Revenue growth helps drive valuations in two key ways:

·    driving the fundamental financial metrics, such as sales and profit,
that valuation multiples are often applied to; and

·    developing more valuable revenue streams and/or opening up new market
opportunities, both of which can drive valuation upside.

An example of the latter would be Klarna. While valuation multiples have risen
since first investment, from levels the Investment Adviser considered to be
undervalued initially, the Investment Adviser believes this reflects the
market's optimism over progress in the US, where the offering was accelerated
via the addition of primary capital in 2019 and 2020.

The Investment Adviser believes there is considerable potential to invest
selectively in the portfolio to enhance the growth prospects for a number of
its investee companies, which it believes will generate value for shareholders
by either enhancing the eventual return, and/or accelerating that return. To
that end, it has identified two near-term opportunities where follow-on
capital may be deployed, with a number of further opportunities, most likely
in early 2022.

Selective new investments

While undertaking follow-ons is likely to be the key focus, the Investment
Adviser still believes there is room to selectively add to the number of
portfolio holdings.

Previously, the Investment Adviser has articulated a vision of a portfolio of
15 to 20 holdings to give shareholders a sense of what it believes to be an
appropriate portfolio composition. Currently the Company has 17 assets, but
this includes Embark - where a sale has been agreed to Lloyds Bank, subject to
regulatory clearance - and Growth Street - where the company is in the final
stages of liquidation.

Excluding these two assets means the portfolio consists of 15 effective
assets, at the bottom end of the Investment Adviser's indicated range.

Expanding the portfolio brings diversification benefits to shareholders, not
only just in terms of number of units, but also because it allows the
Investment Adviser to invest in a wide spectrum of assets at slightly
different stages of maturity. The Investment Adviser believes this latter
point is important as it builds diversity into the likely exit dates of the
portfolio to give the best possible chance of smoothing likely capital returns
for reinvestment.

The track record of investing in new assets has been strong. "Cohort 2" assets
- those funded by raises undertaken post investment of the Company's IPO
proceeds, but prior to those made following the March 2021 raise - show very
strong performance. This group of assets, which consists of Klarna, wefox,
Embark, You & Mr Jones, Featurespace and Sorted, has generated a gross IRR
of well over 100%. The Investment Adviser believes this clearly shows that
diversifying the portfolio via new capital has been value accretive to
existing and new shareholders.

Market outlook

Growth in the late-stage, private market has been substantial in the year to
date. As of September 2021, the total capital committed in this sector of the
market in Northern and Western Europe - the Company's current focus - was over
double that invested over 2020 at c.£38 billion. Within the market, a major
crossover player was present in c.15% of deals by number, versus just c.7% in
2019, demonstrating the attractiveness of this type of capital to investee
companies. The bulk of these investors are of US origin, showing the gap in
Europe that Chrysalis is aiming to fill.

With an established and well regarded platform, the Investment Adviser
believes the Company is in an enviable position to exploit this growing market
opportunity and that these dynamics are very supportive of its desire to
continue to develop the Chrysalis proposition and capture this potential
late-stage, private valuation accretion to the benefit of its shareholders.

Pipeline and capital raise

Given the opportunity set available to the Investment Adviser, it believes a
capital raise of £125 million would give it the funding required to execute
the majority of the likely follow-on opportunities available to the Company
into early-2022. Considering the total pipeline, including some of the larger
new investment opportunities, the Investment Adviser believes the Company
could readily invest up to £175 million of fresh capital, with the aim of
both accelerating growth in the portfolio, and to selectively add new
investments. Historically, the Investment Adviser has been able to deploy
funding efficiently, and expects this raise to be committed in a timely
manner.

Expected Timetable for the Placing

 

 

 Event                                                                Date
 Placing opens                                                        1 December 2021
 Latest time and date for commitments under the Placing               1.00 p.m. on 10 December 2021
 Trade date                                                           13 December 2021
 Admission                                                            8.00 a.m. on 15 December 2021
 Crediting of CREST stock accounts in respect of the Ordinary Shares  15 December 2021

 

Each of the times and dates set out below and mentioned elsewhere in this
document may be adjusted by the Company, in which event details of the new
times and dates will be announced via a Regulatory Information Service.
References to a time of day are to London time.

 

Liberum Capital Limited and Numis Securities Limited are acting as Joint
Bookrunners in respect of the Placing.

Capitalised terms shall have the meanings attributed to them in the Prospectus
unless otherwise defined in this announcement.

 For further information please contact:

 

 Maitland Administration (Guernsey) Limited      +44 (0) 1481 749364

 Elaine Smeja

 Jupiter Asset Management                        +44 (0) 20 3817 1325

 Magnus Spence

 Liberum Capital Limited                         +44 (0) 20 3100 2000

 Chris Clarke / Darren Vickers / Owen Matthews

 Numis Securities Limited                        +44 (0) 20 7260 1000

 Nathan Brown / Matt Goss

 

 

IMPORTANT INFORMATION

 

This announcement which has been prepared by, and is the sole responsibility
of, the Directors of the Company has been approved for the purposes of section
21 of the Financial Services and Markets Act 2000 ("FSMA") by Jupiter
Investment Management Limited (the "Investment Manager"), which is authorised
and regulated by the Financial Conduct Authority.

This announcement is an advertisement and does not constitute a prospectus
relating to the Company and does not constitute, or form part of, any offer or
invitation to sell or issue, or any solicitation of any offer to subscribe
for, any shares in the Company in any jurisdiction nor shall it, or any part
of it, or the fact of its distribution, form the basis of, or be relied on in
connection with or act as any inducement to enter into, any contract therefor.
Copies of the prospectus are available from the website
(www.chrysalisinvestments.co.uk) and the Company's registered office

Recipients of this announcement who are considering acquiring Ordinary Shares
are reminded that any such acquisition must be made only on the basis of the
information contained in the prospectus which may be different from the
information contained in this announcement. The Subscription for Ordinary
Shares is subject to specific legal or regulatory restrictions in certain
jurisdictions. Persons distributing this announcement must satisfy themselves
that it is lawful to do so. The Company assumes no responsibility in the event
that there is a violation by any person of such restrictions.

The Ordinary Shares have not been, and will not be, registered under the US
Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws or with any securities regulatory authority of any state or
other jurisdiction of the United States. Accordingly, the Ordinary Shares may
not be offered or sold within the United States or to, or for the account or
benefit of US persons (as defined in Regulation S under the Securities Act
("Regulation S")), except pursuant to an exemption from or in a transaction
not subject to, the registration requirements of the Securities Act. The
Ordinary Shares are being offered and sold (i) outside the United States to
non-US-persons in reliance on Regulation S and (ii) within the United States
only to persons reasonably believed to be qualified institutional buyers
("QIBs"), as defined in Rule 144A under the Securities Act, that are also
qualified purchasers ("QPs"), as defined in Section 2(a)(51) of the US
Investment Company Act of 1940, as amended (the "Investment Company Act") and
who deliver to the Company and Liberum or Numis Securities (as applicable) a
signed Investor Representation Letter. The Company has not been, and will not
be, registered under the Investment Company Act, and investors will not be
entitled to the benefit of that Act. No offer, purchase, sale or transfer of
the Shares may be made except under circumstances which will not result in the
Company being required to register as an investment company under the
Investment Company Act.

Neither this announcement nor any copy of it may be: (i) taken or transmitted
into or distributed in any member state of the European Economic Area (other
than to professional investors in Belgium, Denmark, the Republic of Ireland,
Luxembourg, the Netherlands, Norway and Sweden), Canada, Australia, Japan or
the Republic of South Africa or to any resident thereof, or (ii) taken or
transmitted into or distributed in Japan or to any resident thereof. Any
failure to comply with these restrictions may constitute a violation of the
securities laws or the laws of any such jurisdiction. The distribution of this
announcement in other jurisdictions may be restricted by law and the persons
into whose possession this document comes should inform themselves about, and
observe, any such restrictions.

Each of Liberum and Numis Securities which are authorised and regulated by the
Financial Conduct Authority in the United Kingdom, is acting only for the
Company  in connection with the matters described in this announcement and is
not acting for or advising any other person, or treating any other person as
its client, in relation thereto and will not be responsible for providing the
regulatory protection afforded to clients of Liberum or Numis Securities (as
applicable) or advice to any other person in relation to the matters contained
herein. Neither Liberum, Numis Securities nor any of their respective
directors, officers, employees, advisers or agents accepts any responsibility
or liability whatsoever for this announcement, its contents or otherwise in
connection with it or any other information relating to the Company, whether
written, oral or in a visual or electronic format.

This announcement includes statements that are, or may be deemed to be,
"forward-looking statements".  These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends", "may", "will",
or "should" or, in each case, their negative or other variations or comparable
terminology.  These forward-looking statements relate to matters that are not
historical facts regarding the Company's investment strategy, financing
strategies, investment performance, results of operations, financial
condition, prospects and dividend policies of the Company and the instruments
in which it will invest.  By their nature, forward-looking statements involve
risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.  Forward-looking
statements are not guarantees of future performance.  There are a number of
factors that could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking statements.
These factors include, but are not limited to, changes in general market
conditions, legislative or regulatory changes, changes in taxation regimes or
development planning regimes, the Company's ability to invest its cash in
suitable investments on a timely basis and the availability and cost of
capital for future investments.

The Company expressly disclaims any obligation or undertaking to update or
revise any forward-looking statements contained herein to reflect actual
results or any change in the assumptions, conditions or circumstances on which
any such statements are based unless required to do so by FSMA, the Listing
Rules, the Prospectus Regulation Rules made under Part VI of the FSMA or the
Financial Conduct Authority or other applicable laws, regulations or rules.

Information to Distributors

Solely for the purposes of the product governance requirements of Chapter 3 of
the FCA Handbook Product Intervention and Product Governance Sourcebook (the
"UK MiFIR Product Governance Requirements") and/or (where applicable to EEA
investors and EEA firms) the product governance requirements contained within:
(a) EU Directive 2014/65/EU on markets in financial instruments, as amended
("Directive 2014/65/EU"); (b) Articles 9 and 10 of Commission Delegated
Directive (EU) 2017/593 supplementing Directive 2014/65/EU; and (c) local
implementing measures (together, the "MiFID II Product Governance
Requirements"), and disclaiming all and any liability, whether arising in
tort, contract or otherwise, which any manufacturer (for the purposes of the
UK MiFIR Product Governance Requirements or MiFID II Product Governance
Requirements, as applicable) may otherwise have with respect thereto, the
shares the subject of the Placing have been subject to a product approval
process, which has determined that such shares are: (i) compatible with an end
target market of retail investors and investors who meet the criteria of
professional clients and eligible counterparties, each as respectively defined
in paragraphs 3.5 and 3.6 of the FCA Handbook Conduct of Business Sourcebook
or the MiFID II Product Governance Requirements, as applicable; and (ii)
eligible for distribution through all permitted distribution channels (the
"Target Market Assessment").

Notwithstanding the Target Market Assessment, Distributors should note that:
(i) the price of the shares may decline and investors could lose all or part
of their investment; (ii) the Shares offer no guaranteed income and no capital
protection; and (iii) an investment in the shares is compatible only with
investors who do not need a guaranteed income or capital protection, who
(either alone or in conjunction with an appropriate financial or other
adviser) are capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear any losses that may
result therefrom. The Target Market Assessment is without prejudice to the
requirements of any contractual, legal or regulatory selling restrictions in
relation to the Placing.

For the avoidance of doubt, the Target Market Assessment does not constitute:
(a) an assessment of suitability or appropriateness for the purposes of
Chapters 9A or 10A respectively of the FCA Handbook Conduct of Business
Sourcebook or the MiFID II Product Governance Requirements, as applicable; or
(b) a recommendation to any investor or group of investors to invest in, or
purchase, or take any other action whatsoever with respect to the shares.

UK PRIIPs Regulation

In accordance with the UK version of Regulation (EU) No. 1286/2014 on key
information documents for packaged retail and insurance-based investment
products, which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018, as amended (the "UK PRIIPs Regulation"), a key information document
(the "KID") in respect of an investment in the Ordinary Shares has been
prepared by the Company and is available to investors at
www.chrysalisinvestments.co.uk.

If you are distributing Ordinary Shares, it is your responsibility to ensure
that the KID is provided to any clients that are "retail clients".

The Company is the only manufacturer of the Ordinary Shares for the purposes
of the UK PRIIPs Regulation and none of Liberum, Numis Securities or Jupiter
Investment Management Limited are manufacturers for these purposes. None of
Liberum, Numis Securities or Jupiter Investment Management Limited makes any
representations, express or implied, or accepts any responsibility whatsoever
for the contents of the KID prepared by the Company nor accepts any
responsibility to update the contents of the KID in accordance with the UK
PRIIPs Regulation, to undertake any review processes in relation thereto or to
provide the KID to future distributors of Ordinary Shares. Each of Liberum,
Numis or Jupiter Investment Management Limited and their respective affiliates
accordingly disclaim all and any liability whether arising in tort or contract
or otherwise which it or they might have in respect of the key information
documents prepared by the Company. Investors should note that the procedure
for calculating the risks, costs and potential returns in the KID are
prescribed by laws. The figures in the KID may not reflect actual returns for
the Company and anticipated performance returns cannot be guaranteed.

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