Seraphim Space (SSIT ) has sold nine early-stage portfolio companies to newly launched sister fund Seraphim Space Ventures II, in which it will receive a stake rather than much-needed cash. 

The £130m investment trust offloaded the companies for £3.8m, a 9% premium to the price portfolio manager Mark Boggett paid for them at launch in July 2021, a market update on Monday said. 

The sale of the companies, which make up 1.7% of net assets, is the only commitment SSIT will make to the Venture fund, which will invest in seed and ‘series-A’ space technology companies over its ten-year life.

‘The strategic decision to divest the early-stage portfolio has the dual benefit of enabling SSIT to concentrate its resources on its more mature assets, while also building a larger pipeline for future growth round investments via the Venture fund’s wider portfolio of early-stage space tech companies,’ said chair Will Whitehorn. ‘Hence we consider this transaction to be a win-win for SSIT’s shareholders.’

Announcing the launch of the Venture fund, Boggett explained the make-up of Seraphim’s various funds: ‘With our investment-readiness focused accelerator helping start-ups to reach the launch pad, the new fund providing ignition for lift-off, and our listed growth fund providing the fuel to achieve escape velocity, we have a unique offering to help our companies sky-rocket.’

While Seraphim’s net asset value remains unchanged, it marks the fund’s first disposal and validates the valuation of a portfolio that was hammered in the 2022 growth selloff but has doubled from last November’s lows on hopes of interest rate cuts.

Recent interims showed almost two-thirds of net assets, or seven companies, were fully funded, with the sale meaning the overall portfolio will have a stronger cash runway as early-stage companies require more investment.

The shares rose 5% to 57.8p on Monday morning, extending gains to 99% over the last five months, making it the fourth best-performing fund in the entire investment company sector, according to data from Deutsche Numis, as growth-focused trusts make a comeback.  

It remains heavily discounted though, trading 49% below the 31 December net asset value of 94.57p per share. 

Stifel analyst Will Crighton criticised the sale as the trust has held and funded the nine companies over a difficult period for the market, but is selling them just as sentiment improves, which only appears to benefit the Venture fund. 

‘From a governance perspective, this is a red flag and one where the chair should provide greater colour to the rationale for approving such a transaction,’ Crighton said. ‘The NAV is unchanged following the sale at 31 December valuation, and the sale is in exchange for an interest in the new venture fund rather than cash. Overall, we think this raises some questions over governance.’