In March, VG1 and VG8 announced the result of their months-long review process to determine how to close the significant gap to NTA. Disappointingly, the best idea the manager (VGI Partners), along with their Boards and consultants, could come up with was to restart the share buybacks that they stopped to undertake the review. We were underwhelmed but not surprised. Coincidentally, VGI Partners finalised a merger with Regal during the month, which likely solidified the decision to prioritise VGI management interests ahead of the LIC shareholders in the short term. While we welcome the oversight of the Regal team once the merger culminates, we fail to see how it will meaningfully improve the VGI team’s investment prowess. The positive out of the merger is that we do believe Phil King and Regal management have a very low tolerance for underperforming strategies. We expect that failing a significant performance improvement, both VG1 and VG8 will cease to exist in their current form within two years. We also expect further shareholder activism in the short term. For these reasons, we continue to hold the majority of our position in both stocks, though we will likely be an active trader as NTA discounts fluctuate.
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Things have not gone the way shareholders like myself were hoping (i.e. the funds to be wound up or merged with RF1 or turned into active ETF). I can be patient but if performance keeps going south, closing the NTA gap will not be enough to be a profitable investment. At this stage I will wait it till the end of FY in case Geoff decides to make a move.
VG1 Price at posting:
$1.75 Sentiment: Hold Disclosure: Held
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