UK 02:45 Sunday, 25 October 2026
Breaking news and expert analysis on fast-moving AIM and LSE listed shares
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Having originally suggested that Core VCT 3 CR3 was an arbitrage buy with a decent margin of safety over the Christmas break as my second tip of the year, at 51p offer – where they now trade once again – the article drew some comment at the time that all was not quite as it had seemed. I am particularly grateful to Tim Grattan for raising concerns about the mechanism of how value in the VCT fund is attributed to B-shares.
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Comments
wildrides
Bloody hell ! I am so glad that I am thick . If had a brain I might think I understood it and actually buy some ……….. as it is , I am happy to observe the ensuing chaos from the sidelines . Sometimes being thick actually has its fringe benefits . I learnt that watching Forest Gump . He got a shag with out actually even wanting one , and she was fit too . That never happens in my world.
Tim J Grattan
Nigel, good stuff and thanks for the name check.
Your original article and the correspondence that followed (both here and on the Motley Fool) prompted me to write to the company to point out the lack of transparency in the annual and interim reports concerning the true NAV of the ordinary shares and the C shares. They were unrepentant in their reply and I was told that the Directors considered the current disclosure in the reports as satifactory and the Auditor had indicated that the current procedure for reporting the NAV for the ordinary shares was adequate. I followed up with a further email suggesting that perhaps they could compromise by quoting the corrected NAV (as a footnote underneath the uncorrected NAV). My second email has gone unanswered (after 8 days).
I will join you at the AGM and if the next annual report continues to report the NAV as per previous reports, I will be voting against the accounts, against any director seeking re-election and against the re-appointment of the Auditors
nigel somerville
Tim – not at all, it would be disingenuous not to acknowledge! Completely agree re voting at AGM. I will follow up re dir holdings of B shares too. It would be awful if it were to transpire that they had profited from misunderstanding of B mechanism by shareholders who might now feel misled.
I think the company has behaved disgracefully and am sure the only reason I eventually got a reply was the threat of the write-up on ShareProphets. I have asked for comment on assertion that chairman’s statement was incorrect and misleading. No response thus far….
Dave Green
Great work guys. This is a bizarre vehicle that has published wrong information in its results statements. Id definetly like to see them re-issue the last results.
nigel somerville
This stating of NAV and chairman’s selective description of B-share mechanism has been going on for years. I’d love to think that it could all be re-stated but can’t see it happening! I’m with Tim, votes at AGM needed. I wonder how much support could be garnered…
Tim J Grattan
The three Core VCTs came out with updates on Tuesday afternoon, these included NAV updates (disappointing reductions) , proposals for large capital dividends (payable in May), delisting (in April) and subsequent winding up.
CR3: http://www.investegate.co.uk/core-vct-plc—cr3-/gnw/statement-re-recommended-proposals-relating-to——/20150310155816H0881/
CR4: http://www.investegate.co.uk/core-vct-iv-plc—cr4-/gnw/statement-re-recommended-proposals-relating-to——/20150310160015H0902/
CR5: http://www.investegate.co.uk/core-vct-v-plc/gnw/statement-re-recommended-proposals-relating-to——/20150310160244H0910/
There has been some chatter about these announcements on the Motley Fool VCT forum by a couple of the regulars including myself (see link):
http://boards.fool.co.uk/en-core-13128919.aspx?sort=whole#13178840
After taking everything into account I think the proposals are bad news for shareholders. The ordinary shares in all three VCTs will probably end up down quite substantially by the end of the week, or possibly as early as tomorrow.
My thoughts on the proposals (also summarised on the Motley Fool) are as follows:
It seems probable that there will be quite a bit of selling of all classes of shares prior to the delisting (there usually is when shares delist). This will result in downward pressure on the share prices for all three VCTs
All three VCTs have had an unexpected reduction in NAV since the last update, as a result of the write down in the value of Allied (1.4p/share reduction for CR3 and around 3.5p/share reduction for CR4 and CR5), so the share prices should adjust to take this into account.
In addition to these NAV reductions, there may be further NAV reductions for CR4 and CR5 regarding Allied. Core VCT has no current intention to force repayment of their Allied SLNs, but what about in the future and what about the SLNs owned by the unnamed third party? If there is a forced repayment, it sounds like it will probably wipe out CR4’s and CR5’s investment in Allied. This would cost shareholders a further 3.8p reduction in NAV. The quoted share prices for CR4 and CR5 should further adjust to reflect this risk.
Following the proposed 35p/share dividend payment to the CR3 ords, the CR3B shares will be getting close to paying out. The ords will only need to pay out a further 22p/share, then the CR3B shares will be paid 28p of dividends (catch up payment) before the CR3 ords see any further distributions. Given that the bulk of the potential return for the manager lies in the B shares, the manager may be tempted to get this 28p payment out as soon as possible which could result in hasty asset sales and a sub optimal return on some of the remaining assets within the investment portfolio. This would ultimately affect the eventual returns for all three VCTs, but especially the returns for the CR3 ords post delisting. The quoted share prices leading up to delisting may well reflect this risk.
The RNS statements were extremely opaque with respect to the true value of the B shares, why was that? Many shareholders who haven’t been following events as closely as we have on TMF may not realise that the real NAV for the B shares is around 32p/share and that following the 35p dividend payment and then another 22p/share to the ords at some stage in the near future, the B shares will pay out 28p/share before the CR3 ordinary shares receive any further distributions. These shareholders may now sell their B shares in the market believing that they have little or no intrinsic value, in which case what are the odds that the manager will be looking to scoop them up at bargain prices?
The last time the VCTs disposed of “hard to shift” assets, they had to accept just 80p in the £ (the assets were purchased by CC1LP, an entity controlled by Core Capital). What are the chances of this sort of thing happening again? Perhaps it could be a new partnership (CC2LP ?) buying some or all of the remaining assets. What sort of discount would shareholders have to put up with should that occur?
In conclusion, I have considerable reservations about these proposals, I think there are definite risks that many (or all) shareholders will end up receiving significantly less than the full value of their VCT investments as defined by the current published NAV values (adjusted for B share distribution mechanism).
I will be a willing buyer of the B shares should they become available at fire sale prices in the next few weeks and so align my interests with those of the manager. I will phone the broker tomorrow to place an opportunist bid for B shares on the order board (other PIs may consider doing the same). If there are going to be some B shares going cheap prior to delisting, it would be much better if ordinary PIs were to pick them up, rather than the manager.
nigel somerville
I’m more positive than Tim – update on the way. From the point of view of long term holders I think that there are possible negatives, but for those who got in late Dec this looks pretty good.
The potential conflict of interests over Allied could provide yet more controversy: essentially CR3 holds secured debt while the other two Core funds hold equity. If a decision over calling in security comes to pass then the manager has to chose who loses out: not good.
However, given the very late (Jan is implied) funding by CR3 we might expect this to resolve gracefully as the egg-on-face would otherwise be considerable.
Completely agree with comments over statements of NAV – disgraceful, misleading and grossly disingenuous.
pink53
It is a funny old world isn’t it?
CR3B is not a terrible liquid share but on 9 March 2015 there was by the standards of the share a large buy order (more than the last couple of months trades put together). Then on 10 March 2015 there is a proposal which it has been suggested might favour holders thereof. How lucky is that?