Chrysalis Investments announces successful sale of Graphcore to SoftBank

Chrysalis Investments Limited (Chrysalis) has confirmed the sale of its stake in Graphcore to SoftBank Group Corp., a strategic move that significantly boosts its liquidity and underscores the value of its investment decisions.

Chrysalis’s disposal of Graphcore, which was flagged as a “likely disposal” back in December 2023, has culminated successfully with expected cash proceeds of approximately $56.0 million. The initial consideration stands at $54.8 million, excluding modest deferred payments typical in such transactions. This sale translates into expected proceeds of £43.8 million, reflecting a notable 25% premium over the company’s carrying value of £35.1 million as of March 31, 2024. This premium represents an uplift of approximately 1.46 pence per share, demonstrating a robust return on a historically risky investment.

Graphcore, recognized for its pioneering work in machine intelligence semiconductor technology and its highly innovative Intelligence Processing Unit (IPU), represents a key play in the burgeoning AI market. Despite being one of the riskier bets in Chrysalis’s portfolio, the strategic positioning in the capital structure offered significant downside protection and has resulted in a favorable exit outcome.

As of July 10, 2024, Chrysalis reported total liquidity of about £13.8 million, reflecting ongoing investments, such as a €10.5 million injection into wefox and fluctuations in the share price of Wise. Following the Graphcore sale, Chrysalis anticipates a liquidity boost to approximately £50 million. This improvement aligns with the company’s Capital Allocation Policy (CAP), meeting the required cash reserve and setting the stage for potential returns of £100 million to shareholders upon further realizations.

Nick Williamson and Richard Watts, Managing Partners of the Investment Adviser, noted the significant impact of the Graphcore sale on the firm’s strategic financial positioning. They acknowledged the challenges and learnings from the Graphcore investment, commending Nigel Toon and his team for their successful management and eventual profitable exit. The partners emphasized the ongoing potential for additional cash realizations and the exploration of combining these with a debt facility to enhance shareholder value.

This transaction not only bolsters Chrysalis’s liquidity but also reinforces confidence in its investment strategy, particularly in high-stakes, high-reward sectors like advanced technology and AI. The firm remains actively involved in various stages of investment processes that promise further financial enhancements and strategic growth.