Veteran investor Neil Woodford has been dealt a blow following the suspension of three of his stakes in unquoted private companies on the Guernsey stock exchange last night, following his decision to list them offshore in order to reduce his flagship’s funds exposure to unquoted holdings.
Mr Woodford shifted his stakes in the biotech company Benevolent AI, cold fusion company Industrial Heat and technology investor Ombu offshore between the middle of last year and March 2019 amid pressure to keep his flagship equity income fund within the financial regulator’s 10 per cent limit for unquoted stocks.
However according to company notices uploaded to Guernsey’s International Stock Exchange Authority on Friday Mr Woodford’s stakes in all three companies were suspended on 11 April, at 6pm.
Stocks are usually suspended if there are question marks over whether they have complied with the exchange’s listing rules. The preference shares could now either be cancelled or the suspension lifted.
Mr Woodford has been battling to keep his flagship fund compliant with regulations that restrict investments in unquoted securities for more than a year.
His Equity Income Fund had peak assets of £10.2bn in May 2017 but investors have withdrawn capital every month since then, with the fund now shrinking to £4.7bn. To satisfy investor redemptions, Mr Woodford has had to sell liquid investments in his quoted stocks, in the process elevating the weighting of his unquoted portfolio. The fund last year had a weighting of more than 9.5 per cent in unquoted stocks, dangerously close to the 10 per cent cap imposed by the Financial Conduct Authority.
However, the rules allow unquoted companies planning to list within 12 months to be reclassified from the unquoted segment to the quoted segment. The fund had 7.76 per cent of its investment in unquoted securities earlier this month.
A Woodford Investment Management spokesperson said: “We have worked with businesses across different markets including Nasdaq, AIM and TISE and instances where we decided that it is in the companies’ interests to remain private.”
He added: “It is a fluid journey. A company may initially intend to list but then circumstances change. Other opportunities may come their way, or a market listing may no longer be in the interests of the company given market conditions.”
However, one of the corporate sponsor of the companies involved said it was “surprised” at TISE’s decision.
Jonathan Gray, Director, Belasko Corporate Finance said: “We are surprised at the decision. We were not consulted in advance and have been given no clear justification for it. The companies concerned have complied fully with TISE Listing Rules at every stage.”
The suspension of dealings in the three shares has no impact on the investments held in the three companies within Mr Woodford’s flagship fund.
Mr Gray said Belasko was now in discussion with TISE.
Mark Nicol, managing director of The International Stock Exchange Authority, which is the market operator of The International Stock Exchange (TISE), said: “This is a regulatory matter which is confidential in nature and therefore, I am unable to make any further comment at this time.”
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