Riverstone Energy (RSE ) has launched a $100m (£80m) tender offer to give investors a chance to sell just over 30% of their holdings in the specialist private equity fund languishing on a near-50% discount to net asset value (NAV).

Although investors are only being offered yesterday’s closing price of 578p, the tender offer represents an efficient way to reduce a position in a comparatively thinly-traded stock.

If fully subscribed, Numis Securities’, the investment company’s corporate broker, estimates the repurchase of up to 13.84m shares at a 47.5% discount will add 18.6%, or £1.91, to the latest NAV per share at 30 June.

Shareholders have until 26 September to tender the shares with the buyback requiriing the approval of an extraordinary general meeting on the following day.

The London-listed Guernsey closed-end fund is managed by Riverstone Investment Group in New York. It has about $123m in cash following several disposals and strong cashflows from investments. While it will pause share buybacks during the tender offer, it may resume them once it has complete.

According to Numis, since starting the buyback programme in May 2020, the company has returned over $186m (143m) to shareholders, repurchasing 43% of its shares, with no improvement in the discount.

Half-year results on Tuesday showed RSE’s decarbonisation and transition portfolio dragged on returns as the growth-style investments came under pressure from rising interest rates.

Over the six months to 30 June, NAV per share fell 11% to $12.90 per share, or a 15% fall in sterling terms, largely driven by a $72m fall in the valuations of the decarbonisation portfolio, which comprises of 12 investments. Anuvia Plant Nutrients, a debt-laded sustainable fertiliser manufacturer in Florida, folded with RSE writing off the remaining $14m of its original $20m investment.

On the conventional side of three legacy investments in oil and gas businesses, a $70m fall consisted of $53.5m in realisations and $16.5m in valuation falls, as the trust shifts to the energy transition space, much like its stablemate Riverstone Credit Opportunities Income (RCOI ).

Launched nearly 10 years ago, RSE shares peaked at £13.35 in August 2017, but in the past five years have left investors with a total loss of 53%. 

Performance since launch

Source: Morningstar