Chrysalis Investments Limited has announced the sale of its stake in AI chip maker Graphcore to SoftBank Group Corp, marking a significant liquidity event for the company and progress towards its goal of returning cash to shareholders.
Chrysalis Investments shares were 2.76% higher at the time of writing.
The transaction is expected to yield gross cash proceeds of approximately $56.0 million, with an initial consideration of $54.8 million.
Chrysalis Investments has a portfolio of investments in technology-related and fintech companies including Klarna, Secret Escapes, and Wise.
Although the company said Graphcore did not live up to initial expectations, the sale represents a notable premium on Chrysalis’s investment, with the expected sterling proceeds of £43.8 million surpassing the company’s current carrying value of £35.1 million by 25%.
This translates to an increase of about 1.46 pence per share for Chrysalis investors.
As of 10 July 2024, Chrysalis reported total liquidity of £13.8 million, comprising £11.6 million in cash and a £2.2 million position in Wise.
Following the Graphcore sale and accounting for a planned investment in wefox, Chrysalis anticipates its total liquidity to reach approximately £50 million.
The company has recently approved a Capital Allocation Policy (CAP) with a clear strategy to return cash to investors when realisations of investments allow.
“With the sale of Graphcore, the Company will have met the cash reserve required to fulfil the first part of the CAP; any further realisations should trigger the second part of the CAP, namely the return of £100 million to shareholders,” said Nick Williamson and Richard Watts, Managing Partners of the Investment Adviser, in a joint statement.
“As mentioned in the interim report, the Company continues to be involved in other processes, at different stages of maturity and certainty, that could lead to further cash realisations and we are still exploring the merits of combining these with a debt facility.
“While the Graphcore investment thesis did not play out as originally envisaged, the knowledge the company built in this space was valuable and this has been recognised by SoftBank. As such, we congratulate Nigel Toon and his team on effecting this exit and wish them well for the future.”