Edison Research December 2022 – The Importance of Deal Structure in Weak Markets

In our last update on Seraphim Space Investment Trust (SSIT), published
in October 2022 (Weathering the storm), we reviewed the company’s
inaugural full year results and in this update we focus on its Q123 NAV
performance. SSIT’s manager (Seraphim Space Manager LLP) is keen to
draw attention to the valuation methodology and deal structure for the nine
unquoted holdings in the portfolio’s top 10 holdings. These account for
c 85% of the current value of all private holdings in the fund and 77% of the
overall invested portfolio value at the end of September, highlighting how
the structure of an investment is a crucial determinant of performance,
especially in a weaker investment environment, and supportive of NAV.
Seraphim has modelled the valuation sensitivity of these nine private
holdings, testing a theoretical 50% reduction in enterprise value to each
holding and gauging the notional impairment to SSIT’s NAV. Seraphim is
not forecasting this reduction, but even if it were to occur it calculates that
the NAV could still be c 85p or only c 19% below the Q123 NAV of 105p.

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