Chrysalis stock surges as Klarna and Starling Bank valuations boost portfolio

Shares in Chrysalis Investments surged over six percent this morning following a significant revaluation of its private equity holdings, including Klarna and Starling Bank.

The private equity trust reported an 11 percent increase in the value of its underlying assets to 156p per share for the last quarter of 2024, according to its latest trading update, as reported by City AM.

Starling Bank, accounting for 29 percent of Chrysalis' portfolio, saw a 10 percent valuation boost, mirroring share price rises in similar companies.

Klarna's valuation also climbed by just over 10 percent, with Chrysalis injecting an additional £8 million into the fintech giant, which now represents 15 percent of the trust's portfolio.

Deutsche Numis analyst Gavin Trodd has pegged Klarna's valuation at approximately $16 billion (£12.98 billion), following the revaluation, despite media speculation of a potential $20 billion (£16 billion) valuation.

"The portfolio is highly concentrated meaning it is high risk, but also has the potential for large gains, especially if Klarna successfully IPOs this year," commented Stifel analysts Will Crighton and Iain Scouller.

Chrysalis further bolstered its investments with an additional £17 million stake in Berlin-based insurtech company Wefox, whose valuation soared by 35 percent after reassessments of capital flows and the "downside scenario".

However, not all news was positive; luxury travel firm Secret Escapes, another holding within Chrysalis' portfolio, experienced a 21 percent decline in value over the same period, as noted by the Stifel analysts.

After selling its stake in the fraud detection enterprise Featurespace last month, Chrysalis Investments is now in possession of a £141 million cash reserve.

The firm has been using this surplus to conduct share buybacks, having returned £36 million to its investors already, and has committed not to undertake new investments until it has distributed £100 million back to shareholders.

Moreover, Chrysalis has vowed that any potential sales within its portfolio will see at least 25% of the net realised gains given back to its shareholders.

The additional liquidity also provides an opportunity for secondary investments in existing portfolio companies if required, as seen with its engagement in Wefox, as pointed out by analysts at Stifel.

"The shares are now trading on a 35 per cent discount this morning... which looks far too cheap given over £60m of buyback capacity left under the capital allocation programme and scope for further liquidity events," observed Trodd from Numis.