Activist investor Crystal Amber (CRS) has bought a stake of over 2% in Woodford Patient Capital Trust (WPCT) raising the intriguing possibility of a campaign against fund manager Neil Woodford, one of its longest backers.
Full-year results from Crystal Amber last week revealed Patient Capital was its sixth biggest holding, accounting for 7% of net assets at the end of June.
Crystal Amber and its manager Richard Bernstein have hit the headlines this year pressing for changes at De La Rue (DLAR), the bank note printer in which the £226 million smaller companies fund holds a 3.2% stake, and Northgate (NTG), the commercial van hire group where it owns 6.3%.
However, Bernstein’s explanation for the holding in Woodford Patient Capital suggests he views it more as an investment opportunity rather than a need to challenge Woodford on corporate governance or shareholder returns. That may reflect that Woodford Investment Management owns 16% of Crystal Amber.
Crystal Amber began buying into WPCT after the announcement in March that biotech giant Celgene was investing $150 million into Prothena, one of the trust’s biggest holdings. This was a ‘major endorsement’ of the business, said Bernstein, although Patient Capital shares traded on a double-digit discount to net asset value at the ‘trough of disillusionment’.
Prothena was shortly afterwards hit by the failure of a key medical trial, wiping two thirds off the market value of the Irish drugs developer and knocking WPCT shares 10% lower. Disappointed shareholders dumped the trust which dropped out of the FTSE 250 index in June, exacerbating the selling pressure on the stock.
‘The fund took advantage of this index-related selling and significantly increased its shareholding,’ said Bernstein.
‘Since then, positive portfolio developments including the listing of Autolus, have contributed to an increase in net asset value to 91.1p at the end of the quarter.
‘The fund continues to believe that the current share price represents an attractive entry level to access a growth portfolio of highly scalable businesses,’ he added.
Crystal Amber has made a modest gain on Patient Capital so far with shares it bought at an average of 78.2p trading today at 79.9p, a 12.5% discount below their NAV per share of 92p.
Overall it was a good year for the company which grew net assets by 19.7% boosted by profitable investments in Ocado (OCDO), Hurricane Energy (HUR), NCC Group (NCCG), FairFX (FFX) and STV (STVG). With its two dividends reinvested shareholders could received a total return of 22.8%.
Crystal Amber's share price is volatile, however, with the discount on the shares widening from 3% to 10% during the financial year despite a buyback programme, although the discount has disappeared since the year end.
Chairman Christopher Waldron, who resigned from the helm of Ranger Direct Lending (RDL) in June after a clash with insitutional investors, said: 'In my first annual report as chairman, I am pleased to report good performance with gains from a number of holdings. Our active engagement with investee companies continues and we are confident that this will yield further positive results in the coming year.'