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Below we outline our view of the impact of the coronavirus outbreak on the Octopus Titan VCT portfolio and provide an update on the portfolio valuation.
Titan portfolio companies operate in a broad range of sectors
Titan has around 80 companies in the portfolio, which have been selected for their long-term growth prospects. These companies are spread across a range of different sectors, making for a well-diversified portfolio.
That means while some companies in the portfolio, such as the three portfolio companies related to travel, have been impacted by the current situation, the impact on the portfolio overall has been more muted.
While the investment risks of investing in smaller companies are well known, it’s worth noting that successful entrepreneurs and early-stage companies are typically much better at adapting to uncertainty and spotting opportunities even in times of crisis, with many of the most successful tech companies having emerged during periods of peak economic uncertainty.
We have recently revalued the portfolio
On 10 March 2020, the Titan Board and Auditors reviewed the portfolio, and approved an unaudited net asset value (NAV) of 93.8 pence per share. This reflects a 25% discount to the equity valuations of the travel companies in the portfolio, from their value as at 31 December 2019.
Titan holds a large amount of cash
Following recent fundraising activity, Titan is currently holding in excess of £300 million of cash, accounting for over 30% of the fund’s net assets, that we have been preparing to invest. Not only will this cash not be subject to any valuation swings, it means we are well placed to provide follow-on funding to support our existing portfolio companies as well as act on any new investment opportunities that arise.
Looking ahead
At this stage, it is unclear what impact coronavirus will have on the future performance of any company and therefore its fundamental valuation. Over time this will become clearer. Some sectors have obviously been impacted already, such as travel, as detailed above. Overall, we remain confident about the long-term prospects for the Titan portfolio, which is focused on nimble, adaptable, tech-enabled businesses. We are working with all portfolio companies to help them to mitigate the business impacts of coronavirus, as well as take advantage of opportunities that may arise.
Get in touch
We understand that you are likely to have further questions related to your particular situation. Please don’t hesitate to call us on 0800 316 2067.