Investment Trust Insider - Opening the door to investment trusts

Register to get unlimited access to our investor forum and all editorial content, including our e-zine and weekly email. Registration is free and only takes a minute.

James Carthew: is this the next Woodford Patient Capital?

James Carthew: is this the next Woodford Patient Capital?

This week I thought I would take a look at FastForward Innovations (FFWD). It is not the biggest fund with a market value of £16.8 million, but it does live up to its name as the company and its portfolio is evolving constantly.

FFWD is a Guernsey-domiciled investment company born from the ashes of China Growth Opportunities and a failed attempt to get involved in African natural resource companies. It adopted a new investing policy in July 2015 and soon after changed its name to FastForward. The new policy was centred around investment in emerging technology and life sciences and sought to identify and back private companies with attractive intellectual property.

Back in summer 2015 the company was building its new business from a low base, net assets at the end of September 2015 were around £1 million. It had a fan club though, and the shares were trading at a premium close to 100%. FFWD’s popularity probably stemmed from the presence of Jim Mellon on the board. The FastForward name was inspired by a book published in August 2014 that he’d written with Al Chalabi.

The fund’s first investments were stakes in Diabetic Boot Company and SatoshiPay. Diabetic Boot’s product is used to treat diabetic foot ulcers. SatoshiPay is using blockchain technology to facilitate electronic payments and, especially, very small electronic payments. The idea is that this makes it ideal for paying for consumption of online media.

The next two acquisitions were of stakes in Intensity Therapeutics, which is using immunotherapy to treat cancer, and Factom, another blockchain business. The sums being deployed weren’t huge – around $1.5 million, but the company was making sufficient progress to keep investors interested and excited. A series of placings followed that saw net assets surpass £10 million by the end of March 2016. The share price for these issues was 8p, which looks great against today’s share price of 13.2p. Nevertheless, these placings were being done at significant premiums to NAV and this a factor in the significant growth of the NAV per share over the fund’s early life. Three new investments were made in this period, Vemo Education (educational funding), Yooya Media (Chinese online media) and Vested Finance (trading as Schoold, college and career counselling).

At the start of 2016, FFWD brought in Lorne Abnoy as chief executive. He had a track record of successful investment in a range of media and technology companies and was executive chairman of both Vemo and Schoold. Over the rest of 2016, FFWD’s portfolio expanded further with investments in Moon Active and Leap Gaming – both facilitating online gaming. Leap Gaming was FFWD’s largest acquisition to date.

At the start of 2017, FFWD announced that someone had made a bid for Schoold and Leap Gaming was considering a flotation. To have two potential exit opportunities on the table so soon after the change in strategy should be pleasing to shareholders. Just two weeks later a third-party investor made an investment in Satoshipay at a price over three times FFWD’s entry price. The investor was Blue Star Capital. Now, FFWD is exchanging its stake in SatoshiPay for a 21.7% stake in Blue Star Capital. The stake in SatoshiPay cost FFWD $160,000. FFWD’s share of Blue Star Capital’s NAV is worth £382,000 (using an NAV calculated at 30 September 2016). Blue Star Capital is like a smaller version of FFWD.

FFWD’s last deal was the acquisition of a 4.7% stake in medical marijuana company, Nuuvera. The stake is costing FFWD C$3 million. This used up the last of FFWD’s cash and so, although FFWD hasn’t announced anything, it may be that they thinking about a new fund raise.

If they were looking to raise money, FFWD would be able to take advantage of what still is a substantial premium. The headline figure is just over 60% but this is based on an NAV that doesn’t take into account any possible uplift from recent deals.

Outside of the VCT market, there has long been a dearth of vehicles investing in early stage businesses. The launch of Woodford Patient Capital Trust (WPCT) two years ago helped address this but there is room for competition and FFWD could fit the bill. It will need to keep expanding though – its small size means that its ongoing charges ratio is unacceptably high.

James Carthew is a director at Marten & Co. The views expressed in this article are his and do not constitute investment advice.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.