Investors trapped in LF Woodford Equity Income (BLRZQ73) have been given some light at the end of the tunnel after more of the fund’s illiquid assets were sold.
Fund administrator Link has sold 19 of the fund’s biotech stocks, representing half of its assets, to US investor Acacia Research in a deal worth £224m.
However, the deal struck values the stocks well below the level they were being valued at by the fund, wiping £114m off its net asset value (NAV).
The drop in NAV from £558m to £444m equates to a roughly 20% slump, taking investors’ losses since the fund was suspended a year ago to 27%.
In a letter to investors, Link said the deal will enable it make further payments to investors ‘in due course’, but warned that due to certain formalities the sale of the assets could take up to six months.
FORCED SELLER PROBLEMS
AJ Bell head of active portfolios Ryan Hughes said the deal moves investors closer to ‘being able to draw a line under this sorry situation’, but said the lower valuation achieved by Park Hill - responsible for selling the fund’s illiquid assets - highlights the problem of being a forced seller, with potential buyers knowing Park Hill and Link weren’t in a strong position to push the price higher.
He said, ‘At the end of the day with such illiquid stocks, these assets are only worth what someone is prepared to pay for them.
‘Ultimately, the challenge for Link has been to find a balance between getting a fair price for the assets and the time taken to achieve this.
‘Given one year has already passed since the initial suspension, I’m sure many investors will feel like this has dragged on long enough and it is time to finalise the winding up of the fund - even if it does mean taking yet another hit on the value of their original investment.’
