Frequently Asked Questions:
1. What is the Company’s view on how close to the $20m net book value will the legacy assets be sold at?
We are confident that our last set of results (June 2023) is a fair reflection of our view of the NAV of $20m. One could reasonably think that since the value of the legacy assets which require no further investment is $20m, it would seem odd to take them off the balance sheet, but the reason is that it is hard to raise money for a Company that holds Asian assets with little synergy, which are illiquid and unlisted.
2. Will Jade do any of its own investing directly into companies or will Jade solely invest in Heirloom fund going forward?
Jade is closely aligned with Heirloom and may continue to invest in Heirloom products which have a strong track record. However, Jade may also make its own investments, often co-investing with Heirloom in order to achieve higher returns. Jade’s investment mandate and strategy is to invest in high yielding alternative assets.
3. When will dividends from Heirloom be passed through to Jade shareholders?
Jade will distribute dividends to its shareholders when it is of sufficient scale. However, the SPV that will own the legacy assets will make distributions to its shareholders once the Corporate Bonds of $3.6m have been repaid by any sale proceeds from assets held and sold out of the SPV. Were no proceeds forthcoming then from any sale of the Asian assets, then the Corporate Bond is the SPV’s problem so to speak, not Jade’s.
4. What mechanisms will be in place for Jade and its existing shareholders to monitor and benefit from the monetisation of the legacy assets?
Jade shareholders will receive an equivalent share in the SPV that will own the legacy Asian assets.
5. There are many more established funds in the alternative asset space, what is Jade’s USP?
Jade is strongly associated with Heirloom, which has an excellent track record shown by their 5 year IRR of 25% and invests primarily in alternative asset classes. I am not aware of many similar funds on AIM although there is a small peer group of UK listed companies in this space that do invest in high yielding alternative assets, namely Gresham House or Rockwood as their acquiror is called, HarbourVest, HgCapital and Oakley to name a few.
6. Why does Heirloom need Jade?
Because Heirloom has made a significant investment in the Company and has a vested interest in its success, evidenced by the investments they made in 2023. Heirloom’s vision is for Jade to grow into a company of significant size that can deliver high returns to its shareholders.
7. What mechanisms will be in place to manage the potential conflict of interest between Heirloom and Jade’s shareholders?
AIM rules require that any related party transactions be reviewed by the Company’s NOMAD to ensure they are fair and reasonable from an independent viewpoint. Investors may be concerned if the largest Jade shareholder is also solely valuing the underlying assets. However Heirloom is audited and third party valuations carried out on their investments, this is the same for Jade, and of course since Jade is listed on AIM, and as mentioned, the Company’s Nomad is involved in giving fair and reasonable independent opinions.
8. Burford Capital came into trouble on how it valued its underlying assets, how does Heirloom’s approach differ to reflect changes in valuation throughout a litigation process?
In our opinion, Burford Capital profitability was heavily tied to a large claim won against Argentina relating to the YPF Repsol expropriation – this had a large collection risk.
They were the subject of a short-seller report by Muddy Waters criticising governance structure and valuation methodology of assets. These events were a number of years ago and the Company seems to be recovering somewhat and performed well share price wise in 2023.
Heirloom’s Litigation finance business is quite different from Burford in that it consists of a high volume of relatively low value claims that settle quickly and have a high success rate. All claims are also insured to ensure minimal downside risk.
There are other litigation finance businesses in the UK. There is an AIM quoted one called Litigation Capital Management which seemed to perform well in 2023.
9. Can you explain how and why the Company will need to further execute its new investment strategy within 12 months as the divestment is deemed a fundamental disposal under the AIM Rules?
Because the value of the legacy assets being disposed represent a large majority of the overall NAV of the Company, it is required to demonstrate that it has continued to implement its investing policy in the 12 months following the disposal.
10. What will the Company have to do to execute its new strategy within 12 months?
It will simply have to make some (unspecified number) of new investments in line with its policy within 12 months.
11. What is the anticipated timeframe for the liquidation of the legacy assets? Have these been written down to a worst case basis?
Some significant disposals are expected in 2024. Others may take longer to realise. Significant write downs of the portfolio were taken at year end 2022. The Directors believe that the carrying values in the Balance Sheet are a fair reflection of realisable values.
12. After the transfer to the SPV, there will be virtually no assets left in the company but rounded up 400m shares and NAV of 0.1p. How do you expect to carry out the proposed business plan?
We are looking to acquire some significant assets in 2024.
13. Would it not be better to liquidate the company rather than go through the cost of a reorganisation?
We do not believe that a liquidation of the Company would deliver anything near fair value for shareholders. In a liquidation scenario the realisable value of legacy assets would be seriously diminished. The potential acquirer of the assets would be aware that they could negotiate much lower prices.
14. Will the legacy assets be able to be held in an ISA?
On tax issues, shareholders should take their own advice however, our understanding is that all AIM shares can be held in an ISA so Jade Road Investments plc will continue to qualify. The SPV however that is holding the legacy assets will not be quoted on AIM and unlikely to qualify since it will not be a UK domiciled company.
15. Can you comment on your approach to your exit strategies for invesments and what considerations are factored in particular with regard to the timing of an exit?
The answer for that, I guess, is that we are actively trying to dispose of all of the assets that we have and each of them is quite different in terms of its nature. So some, as I mentioned earlier will take longer than others. It is extremely complicated dealing with assets in China, not just from the point of view of dealing with local authorities where necessary and dealing with buyers who maybe have a slightly opaque strategy. But we are also dealing with the issue of getting money offshore as and when sales are made, so they're complex situations and we have been working extremely hard and closely in trying to dispose of our assets. Going through some incredibly detailed processes to negotiate agreements, SP agreements with buyers and then finding ways of structuring things so that we can get money offshore.
16. The 'new' strategy appears similar to Majedie so it is not clear what the need for another vehicle is that is much smaller, illiquid etc?
I am not familiar with Majedie but our strategy is really not looking at other companies, but rather it is dealing with the situation that we find ourselves in and trying to find the best solution and a future strategy for the company which will benefit our shareholders. So we are not necessarily looking at other companies to see whether they have a different or better strategy than us. We are just trying to extract the best possible value for our shareholders from our current situation and our assets.
17. How does the Board manage the relationship with Heirloom such that minority shareholders are not particularly disadvantaged?
So I did talk in some detail about the sort of regulations and how they effectively provide rules and regulations and balances with the NOMAD around how we work with a third party like Heirloom. That is a related party. The other answer is that given Heirloom’s position as a majority shareholder, everything that they do is aligned with the other shareholders because if they benefit from it, then so do all the other shareholders. So I do not have any concerns on that particular point.
18. The Board and company has a chequered history and has clearly delivered poor outcomes compared to prior indications. It is challenging to raise money on AIM, the recipe here looks somewhat unrealistic to raise significant sums. What timeframe do you see to assess if this is realistic?
I take that point completely. I think everyone has been disappointed. I would be one of the first in the queue to be disappointed. I think having an investment strategy focused on private equity assets and predominantly in China has clearly not worked out and it's been a very rocky path so no excuses for that, but I think that because of what we've done and because of our relationship with Heirloom and with this particular restructuring, we are creating effectively almost a shell company which can move forward with some assets and with a clear strategy with a very supportive partner. We believe and hope that that will change the picture for Jade and that we will be in a position to execute our investment strategy in a much more significant way during 2024.