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Legendary Investments: Ground floor access to early stage opportunities

Zafar Karim, chief executive of Legendary Investments, talks to Proactive Investors about prospects for the group.

oil
Oil business Dunraven is a key investment

What is Legendary Investments and what do you do?

Legendary Investments basically unlocks private opportunities that aren't available to public investors.

WATCH: Legendary Investments 'unlocking private opportunities' for retail investors

We invest in private companies that are not listed, usually small companies, and we nurture them, provide lots of contacts, advise and help them grow with a view to eventually being involved in a trade sale or listing.

This is very different from an investment trust, which will invest in public companies. We are somewhere between an angel investor and venture capitalist.

Isn’t this a speculative business?

Perhaps it can be considered speculative, but you have to look at the track record.

If you look at blue sky investments where you invest in a business plan it's usually 1 in 100 that goes well.

At the other end you have private equity investments, which are more mature companies, and here it is one in five that goes well.

We set this up with a view to one in 25 going well. Our hit rate so far is five out of twelve.

In terms of return on investment what can shareholders expect?

So far our most successful company to date is a tech company.

When we first got involved we were the first outside investor and still are the largest outside investor

We invested at a valuation of £2mln. Last year a VC invested at a valuation of £66mln, that's a 33 times increase and since then the company's made more progress.

It’s pretty much doubled its revenues, won more clients. And these clients include Tesco, Sainsbury's, Argos, Carphone Warehouse, so this is a massive success

You are looking at looking at many tens of times return.

Why are you the best person to run Legendary?

My career started at Salomon Bros in the Liar’s Poker years, which was a fantastic time to cut my teeth.

I moved to London and did a lot of emerging market work and then spent several years at Rothschild.

But I wanted to be a principal not remain an adviser so in the early 2000's I started doing this off my own balance sheet.

I had a number of successes including some listed companies that I rescued.

One when I got involved had a sub- £10mln market cap and when I left a few years later was worth £80mln.

And Legendary became available as a vehicle and I thought let’s do this from a public company platform as it gives an opportunity to do it in a far more effective way.

How do investors make money?

When we set this up we knew this would take some time because investments take time to come to fruition.

In 2015, the share price was about the level it is at now but net assets were less than half the current value.

Now the net assets are £6mln or so, which is 2- 3 times higher, but the share price is where it was then.

The companies in the portfolio are bigger stronger with far better prospects so I think people can make their own minds up about which direction the share price might go and where it might get to.

Are you confident about company forward?

We did really a placing recently and it was oversubscribed quite significantly.

We were looking for a few hundred thousand but we actually got significant more at £550,000.

I personally put in one hundred thousand pounds and I guess that a symbol of my confidence.

Personally I have 4% of the company all of which I bought in placings, so if that's not a vote of confidence than I am not sure what is.

Looking ahead – what’ s in store for the portfolio?

I think oil company Dunraven is going to move quite fast and could get a listing.

It has one asset with potential proven reserves of 100 million barrels.

We hold it on our balance at a couple of hundred thousand – so that’s a potentially massive return.

At Virtual Stock, another one of our companies, their CEO has said they want to list potentially on NASDAQ in next 18-24 months.

IBS, a banking services platform, recently obtained its licence and I think there's a lot of good to come out of that.

To sum up?

Legendary is a way of getting into the opportunities before they become public and generally returns before the IPO far greater than returns after IPO

If an investor wants to enjoy those returns, this is one way of getting access to them. 

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Legendary Investments book value 'too low' - Capital Network analyst Ed Stacey

Capital Network analyst Ed Stacey says it's an interesting time to revisit the investment case at Legendary Investments Plc (LON:LEG) as the shares are currently trading at a discount to net asset value (NAV) which hasn't been the case in the past.

on 4/9/18

4 min read