Star manager Neil Woodford considers new share issue
A stock market update today said: “Woodford Patient Capital Trust plc has successfully deployed the proceeds of its initial public offering and has a substantial ongoing pipeline of investment opportunities.
“With the current market conditions in mind, the Board of the Company is currently looking at ways it can raise additional capital in the year ahead and will consult with, and gauge interest from, investors.”
Demand for the investment trust, which invests heavily in healthcare stocks, was so high at its initial public offering last April that its target limit of £200m-£500m was hiked to £800m just days before the offer closed.
Commenting on the news, Mark Dampier, head of investment research at Hargreaves Lansdown, said: “Woodford has deployed the money raised by the Woodford Patient Capital Trust at launch more quickly than he originally anticipated – the fund is now almost fully invested with the remaining cash all committed.
“He believes there remain plenty of unexploited opportunities in early growth businesses and wants to consider raising further money to take advantage of these untapped opportunities. In his view there are some outstanding investment cases, but they will not be around forever.”
The investment trust currently has 60 holdings and Dampier expects Woodford to add 20 to 30 with any new money and add to existing holdings which want to raise new cash to help with research and development.
However, Dampier warned that if and when there is a capital raise, a new large tranche might cause the trust’s share price to fall to a discount (to its net asset value) in the short term.
But, he added: “The fact Woodford believes the investment case remains so strong is good for the long-term investor, although there are no guarantees of future performance.
“In my view, any new money raised should not fundamentally change the reasons for holding the trust for the long term – Woodford’s only reason to consider this would be the opportunities he believes are out there. Long-term investors, who take the trust’s name literally and are patient, should be rewarded.”