Draper Esprit pivots from value to growth

While terrible for many sectors, 2020 has been a turning point for some. Aim-listed Draper Esprit (GROW), the technology-focused venture capital fund, is in the latter camp.

Despite realising £106m from portfolio stake sales in the six months to September, its gross portfolio value has remained unchanged at £702m. With either a great appetite for higher-risk funds, or a newfound appreciation for Draper’s track record, the market has woken up.

Deals struck since the period-end – and a £110m fundraising – suggest the pipeline remains active.

At the end of October, Draper joined several investors including London Stock Exchange (LSE) and Fidelity in funding a $50m Series B round for PrimaryBid, the platform that allows retail investors to participate in capital raises for listed UK companies. Chief executive Martin Davis, convinced by the acumen of the platform’s management team, sees “no reason” why the group’s strong run this year won’t continue.

Three more as-yet unannounced investments have been signed, including a new stake in what Mr Davis termed the passion economy – the fast-growing infrastructure around social media influencers. The focus on deep-tech, for which “Covid has just been a blip”, remains steadfast.

While tech-themed hyper-growth sectors have been the flavour of 2020, Draper Esprit shares also appear to have benefited from the rotation to value. They now sit at a premium to Numis’ forecast NAV of 623p per share for March 2021, though this quickly slips back to a 9 per cent discount against FY2022 forecasts.

Little about the company’s market support, portfolio outlook or desire to re-invest cash realisations suggest growth is about to grind to a halt. Buy.

Last IC View: Buy, 596p, 6 Oct 2020