Mindflair (MFAI) , an AI-focused tech investment company, said it invested an additional £300,000 for 315,790 shares in Sure Ventures at 95p/share, increasing its stake to 23.8%. Prior to the purchase, Mindflair held 1,501,000 shares in Sure Ventures or a 20.5% shareholding, which it acquired in February 2021 through issue of its own equity at 13.6p/share.
Sure Ventures' primary asset is a 25.9% shareholding in the Sure Valley Ventures Fund (SVV1) that holds early-stage software companies in the areas of AI, augmented reality, virtual reality, and Internet of Things. Mindflair already has a 13% direct interest in SVV1, and 5.3% indirect interest via its current holding in Sure Ventures.
SVV1 was significantly boosted recently after Infinite Reality announced its acquisition of SVV1 investee Landvault (7% interest) in an all-share deal valued at US$450m. Landvault is expected to seek a listing on Nasdaq in Q3 2024.
Nicholas Lee, Director of Mindflair, commenting: "Given the potential returns that may be generated from SVV1, both from the disposal of Landvault and various of its other investments, it makes sense, at this time, for Mindflair to increase its exposure to this fund by increasing its shareholding in SV plc."
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Mindflair has increased its investment in Sure Ventures and in turn the SVV1 fund, which was significantly bolstered recently after digital media and ecommerce company Infinite Reality announced its acquisition of Landvault in an all-share transaction worth US$450m. SVV1 has a 7% interest in Landvault, a tech company focused on immersive technology and digital twins for large corporate and government clients.
Before today's announcement, Mindflair had a c. 18% combined interest in SVV1. The new subscription will increase MFAI's shareholding in Sure Ventures to 23.8%, which should in turn increase book profits and cash returns realised by MFAI in the short and medium terms from the increased exposure to SVV1.
The sale of Landvault could generate a significant uplift in the carrying value of SVV1's investment, with a realisation expected to follow as Landvault intends to list on Nasdaq in Q3 2024. Consequently, the move is expected to materially increase the valuation of Mindflair. The disposal has the potential to generate proceeds for Mindflair of c. US$6m, depending on the value of Infinite Reality shares, a c. 470% increase in SVV1's carry value of Landvault as of December 31, 2023, and a significant increase in the fund's NAV from December 2023.
As mentioned, the SVV1 fund is managed by Sure Ventures, which even before the announced sale of Landvault was performing very well after multiple realised cash and liquidity events and upward revaluations. In our estimation, MFAI remains undervalued, given the scope for material valuation uplift of the companies within its portfolio. Today's move will also boost MFAI's indirect exposure to the similar SVV2 and SVV3 funds, which have seen exciting investments recently, while SVV1 has completed its deployment phase.
Sure Ventures, which runs the SVV funds, is currently trading at a premium of c. 13% to its last reported NAV of 82.5p/share as of March 31, 2024. However, this excludes the significant uplift to NAV expected as a result of the sale of Landvault. Sure Valley estimates that its NAV could increase by 60-70% as a result of the disposal. Furthermore, as Sure Ventures is an investment trust required to distribute a significant portion of realisations, MFAI is expected to receive a significant cash inflow.
Continued projected growth of the AI sector, and progress reported so far across the SVV1, SVV2 and the new SVV3 funds through which MFAI invests, have bolstered investor confidence in the company's portfolio. Still, MFAI's NAV/share remains very attractive compared to its current share price.
We expect to see more realisations and liquidity events from MFAI's portfolio in the coming months as SVV1 has now completed its deployment phase and entered a realisation phase, expected to generate further cash inflows for MFAI.
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