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Woodford investors lose £24m over Rutherford Health collapse

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15/06/2022
Trapped investors in the Woodford Equity Income fund are set to receive a final share of £118m – down from the expected £142m, due to the collapse of one of its major shareholdings.

Link Fund Solutions – the fund’s administrator – has today published an update for investors where it confirmed the liquidation of Rutherford Health means the value of its remaining assets has fallen to £118.5m.

This is down from the £142.4m calculated just at 31 May 2022. As such, investors awaiting the return of their cash can expect to receive less in the final wind-up payment which is expected in 2023 – more than three years after the Woodford saga unfolded. To date, £2.54bn has been paid out.

In the letter to investors, Karl Midl, managing director, Link Fund Solutions, explained that the LF Equity Income fund (formerly the LF Woodford Equity Income fund) currently comprises shareholdings in a small number of companies.

These include Atom Bank, Benevolent AI, Freevolt (previously named Drayson), Mafic, Nexeon, Origin, RM2 and Rutherford Health, plus cash and other receivables.

The fund’s NAV (net asset value) is usually calculated on or after the last business day of each month, or between these points if there’s a “material change” to the valuation of any asset held by the fund.

As the fund holds relatively few assets, some with large weightings, a change in the value of the remaining assets “will lead to a disproportionately large percentage increase or decrease in the fund’s NAV from time to time”.

Given the “extremely disappointing news” of the liquidation of private cancer treatment provider Rutherford Health, the NAV has been re-calculated and as at 15 June 2022, it has decreased by £23.9m (16.8%) to £118.5m from the valuation of £142.4m calculated on 31 May 2022.

Midl wrote: “When we received the extremely disappointing news that the board of directors of Rutherford Health had resolved to take steps to wind up the company we took the decision to revalue the fund’s holding in the company to zero. While it is premature to know how much may be recovered by the shareholders in Rutherford Health as its liquidation now proceeds, this revaluation to zero reflects the current uncertainty around the fund recovering any returns from the company’s liquidation.”

LFS has also confirmed it will change the frequency of the valuation of the fund’s NAV from monthly to quarterly with effect from 30 June 2022, so the next update will come at the end of September 2022. However, it added there will be additional valuations between these quarter ends “if there are material changes to the valuation of any of the assets held by the fund”.

‘Heaps further pain on investors’

Ryan Hughes, head of investment research at AJ Bell, said: “The liquidation of Rutherford Health, one of the nine remaining companies in the former Woodford Equity Income has clearly had a significant impact on the value of the remaining assets in the fund and heaps further pain on those investors who are patiently waiting for this sorry saga to come to an end.

“There is a delicate balance between winding up the fund and getting a fair price for the remaining assets. After three years I suspect many investors would prefer to draw a line under this, accept a lower price and move on. However, the furore that occurred when Link sold assets to Acacia Research for £224m – some of which were then quickly sold for huge profits – will no doubt have made them wary of accusations they’ve sold assets on the cheap.

“Ultimately, the fact that this saga has dragged on for so long has been damaging for the reputation of the whole industry. No doubt we will hear the familiar words ‘lessons will be learned’ once the final review is concluded by the FCA, but I suspect that will be of little comfort to the thousands of investors impacted and it will take a long time to regain the trust of these people.”

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