US investor Acacia Research has chalked up a $152m (£113m) gain on its cut-price deal to buy stocks from the failed Woodford Equity Income fund just five months after snapping up the assets.
Acacia revealed the sizeable gain, which represents a 54% return on the $282m paid for the stocks in June, in its latest quarterly results, released this week.
The gain has been driven by a huge uplift in the valuation of its stake in Oxford Nanopore, which earlier this year signed a contract with the UK government to deliver Covid-19 testing equipment, as well as surges in the shares of Arix Bioscience (ARIX) and Sensyne Health (SENS).
The news will serve as another blow to long-suffering investors in Neil Woodford’s former flagship fund, who are facing a wait of up to a year for the last of their money back as administrator Link Fund Solutions oversees the sale of assets.
The cut-price agreement to sell 18 of the fund’s quoted and unquoted healthcare stocks wiped 20% off the value of fund, and Acacia, which described the deal as ‘opportunistic’, was able to quickly offload some of the stocks, in some cases within hours of acquiring them.
Acacia’s stake in Oxford Nanopore is now valued at around $127m (£106m), representing a more than five-fold increase on the £20.8m paid for the stock, disclosed in accounts for Neil Woodford’s former flagship fund.
Arix Bioscience’s share price has meanwhile rallied from 60p when Acacia struck its deal to 155p today, swelling the US investor’s stake from £16.1m to £41.6m. Sensyne Health’s shares are up from 44.5p at the time of the deal to 110p, with Acacia’s stake growing from £6.8m to £16.7m.
Shares in Arix have surged 48% over the last week after US pharmaceutical giant Merck (MRK.N) swooped on VelosBio, one of the biotech investor’s portfolio companies, delivering a £142m windfall.
Sensyne Health’s share price rally has followed a series of tie-ups for the healthcare technology company, including partnerships with Bristol Myers Squibb (BMY.N) and the University of Oxford.
The huge uplift in Acacia’s valuation of its Oxford Nanopore stake was meanwhile triggered by two sets of fundraising rounds, in May and October, at a price far higher than the discounted price the US investor paid for its shares.
Under the accounting treatment for the cut-price acquisition, the discount on the $282m deal was applied solely to the unquoted stocks bought, with the quoted companies costed according to the level of their share prices when the deal was struck. The deal was responsible for the bulk of a £91m writedown to the former Woodford Equity Income fund’s value.
Oxford Nanopore’s May fundraising round prompted Acacia to revalue its stake to $108m, the value stated in the US investor’s third quarter results. Acacia chief financial officer Richard Rosenstein added in a conference call outlining the results that Oxford Nanopore’s October fundraise implied a further $19m boost to the value of its stake.
The surge in the shares of Arix and Sensyne since the end of September, the period covered by Acacia’s results, had added a further $34m to the value of the portfolio bought from the former Woodford fund, he said.
Added to the $194m value of the Woodford stocks reported in Acacia’s results, and the $187m generated from quick sales of some of the companies bought from the fund, that takes the total value of the deal to $434m, a $152m gain on the $282m paid.
A spokeswoman for Link Fund Solutions said the sale to Acacia should be judged ‘as a whole’.
‘The transaction is for the sale of a portfolio of the fund’s assets, rather than a series of sales of individual assets,’ she said. ‘Reports relating to the values attributed to the transfer of single assets forming part of the portfolio can be misleading.’