Last month, we discussed the (then scant) details of Wilson Asset Management (WAM)'s newest listed investment company (LIC) which is soon to join the ASX share market. Well, one month later, and the picture is getting clearer.
WAM has just released the prospectus for the new LIC, and it makes for some interesting reading. WAM's new Strategic Value LIC (ticker symbol to be WAR) will hit the ASX boards on 25 June. The listing price will be $1.25 a share. This listing price reflects a net asset value backing of $1.25 a share.
According to the prospectus, the company plans to issue between 13.2 million shares and 180 million shares, depending on demand. This will give the new LIC a market capitalisation of $16.5-225 million if all goes to plan.
Not a penny over either – WAM will not accept oversubscriptions. $115 million worth of shares will be earmarked for existing shareholders of WAM's other LICs through a 'priority offer'. Another $10 million worth of shares will be available for past shareholders, WAM subscribers and friends and family of current shareholders.
Prospective shareholders in the initial public offering (IPO) process will have to apply for a minimum parcel of 1,800 shares, worth $2,250.
What will WAM Strategic Value (WAR) invest in?
WAM Strategic Value will be the eighth LIC in the WAM stable. But this new LIC looks to be a rather unique offering. It intends to invest only in other LICs or Listed Investment Trusts (LITs). Specifically those trading at discounts to their net tangible assets. WAM founder Geoff Wilson says that "essentially, we are focused on identifying and investing in $1 of assets for 80c".
The prospectus notes that this has the potential to be a lucrative hunting ground, stating that "the average discount to NTA of the LIC and LIT sector on the ASX was 10.4% as at 31 March 2021. There are currently 80 entities trading at a security price discount to their underlying NTA within the sector".
The new LIC also plans to offer significant diversification benefits. Here are some more details on this matter from the prospectus:
The investment manager will diversify investments within the portfolio so to reduce the company's exposure to abnormal falls in the market price of any single investment.
In addition, the portfolio is expected to provide diversification benefits by virtue of the underlying assets held in LICs and LITs in which the company invests. For example, through an investment in LICs and LITs, the company may have exposure to a portfolio of listed equities, credit, fixed income, infrastructure, private equity, real estate and cash.
WAM has developed a pretty stellar track record when it comes to its LICs. Its oldest company, WAM Capital Ltd (ASX: WAM), has delivered an average return of 16.4% per annum (before fees) since its inception in 1999.
WAM's last IPO of WAM Global Ltd (ASX: WGB) back in 2018 was fully subscribed. So it's likely that we will see significant interest in this latest offering. Let's see how it goes on 25 June.