21:08:46 EST Fri 02 Dec 2022
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or Name

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Pender Growth Fund Inc
Symbol PTF
Shares Issued 7,581,321
Close 2022-11-24 C$ 6.30
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Pender Growth Fund loses $8.52-million in Q3 2022

2022-11-24 19:16 ET - News Release

Mr. Tony Rautava reports


Pender Growth Fund Inc. has released its financial and operational results for the three months and nine months ended Sept. 30, 2022.

Financial highlights (unaudited)

  • Net loss was $8,520,121 for the three months ended Sept. 30, 2022 (Sept. 30, 2021 -- net income $75,339,050), primarily the result of negative investment performance in the quarter.
  • Net loss per share for the three months ended Sept. 30, 2022, was $1.12 (Sept. 30, 2021 -- net income per share $9.89).
  • Shareholder equity per Class C common share was $10.46 as at Sept. 30, 2022 (Dec. 31, 2021 -- $26.08).
  • The company's total shareholder equity was $79.3-million as at Sept. 30, 2022, a decrease from Dec. 31, 2021 ($198.6-million), resulting primarily from a decline in market prices of public company shares during the period.
  • Shares outstanding were 7,582,329 as at Sept. 30, 2022, a decrease from Dec. 31, 2021 (7,616,529), as a result of share repurchases under the company's normal course issuer bid (NCIB), which was renewed on Feb. 14, 2022.
  • At Sept. 30, 2022, 81.1 per cent of the investment portfolio was made up of private companies and 18.9 per cent of public companies. However, taken together with the company's indirect exposure to public companies through its investment in Pender Private Investments Inc. (PPI) and Pender Private Debt Opportunities Fund I LP (PPDF), public companies make up 86.2 per cent of the company's holdings.
  • Management expense ratio (MER) excluding performance fees was 2.35 per cent for the three months ended Sept. 30, 2022, an improvement by 1.95 per cent compared with the third quarter of 2021.

The company's portfolio is materially concentrated in the shares of one publicly listed portfolio company, Copperleaf Technologies Inc. At Sept. 30, 2022, considering both its direct investment and its indirect investment through its holding of shares of PPI, the company held 6,762,065 shares of Copperleaf with a value of $42,465,767, which is 53.5 per cent of the company's total shareholder equity of $79,305,495 (Dec. 31, 2021 -- 7,455,638 shares with a value of $177,816,957 which was 90 per cent of the company's total shareholder equity of $198,643,655).

During 2021, Copperleaf became publicly listed and its closing price at Dec. 31, 2021, was $23.85 per share. This resulted in a substantial direct and indirect unrealized gain under IFRS (international financial reporting standards). Those unrealized gains were a major factor in the 2021 increase in the company's shareholder equity, which went from $47.3-million at the beginning of 2021 to $198.6-million at Dec. 31, 2021.

As at Sept. 30, 2022, the closing price of Copperleaf was $6.28 per share, a decrease of $17.57 per share from its Dec. 31, 2021, closing price of $23.85 that resulted in a large reversal of the unrealized appreciation that had been recorded on the company's holdings of Copperleaf in 2021, which was a major factor in the $119,338,160 (60.1-per-cent) decrease in the company's total shareholder equity, which went from $198,643,655 or $26.08 per share at Dec. 31, 2021, to $79,305,495 or $10.46 per share at Sept. 30, 2022.

During the nine months ended Sept. 30, 2022, the company sold a total of 745,532 shares from its direct and indirect holdings of Copperleaf. In November, 2022, shares of Copperleaf were trading below $3.50 per share, significantly below their Sept. 30, 2022, closing price of $6.28 per share. There can be no assurance that the company will be able to realize the value of this investment.

Portfolio highlights

The move by central banks to taper monetary and fiscal stimulus and raise interest rates to control inflation, the conflict between Russia and Ukraine, and the continuing effects of the COVID-19 global health pandemic led to concerns about the outlook for economic growth and created volatility in equities as the uncertainty added by these developments were digested. The company believes that it continues to be well positioned today to pursue its investment objectives despite current market volatility and valuations in micro and small-cap stocks in North America.

As always, this quarter the company worked closely with its private portfolio companies and certain of its public portfolio companies.

Significant equity investments and recent developments

Pender Private Investments Inc.

At Sept. 30, 2022, the company held approximately 98 per cent of the Legacy Shares of PPI, formerly the Working Opportunity Fund (EVCC) Ltd. (WOF). These shares were acquired in May, 2021, from shareholders of WOF (exiting shareholders) under the previously announced transaction and in transactions subsequent to May, 2021.

Copperleaf Technologies Inc.

At Sept. 30, 2022, the company held 9.6 per cent of Copperleaf's issued and outstanding shares, both directly and through its investment in PPI. The value of the company's direct and indirect holdings of Copperleaf was $42,465,767 at Sept. 30, 2022, which is 53.5 per cent of the company's total shareholder equity.

D-Wave Quantum Inc.

On Aug. 8, 2022, D-Wave announced the completion of its previously announced intention to list on the New York Stock Exchange following a business combination with DPCM Capital, Inc. and D-Wave Systems Inc., as a publicly traded SPAC named D-Wave Quantum Inc., under the symbol QBTS. The company holds shares of D-Wave both directly and indirectly, through Pender Private Investments Inc., and all of its shares are subject to a lockup period. There is no guarantee that the value of D-Wave shares will be realized after the expiration of the lockup period.

Other highlights

The company continued to acquire shares of the company in the market under the company's NCIB because Pender believes the shares are trading at a discount to their intrinsic value. On Feb. 14, 2022, the company launched a new NCIB, under which the company may purchase a maximum of 678,839 shares, or 10 per cent of the company's public float on launch date, during the one-year period ending Feb. 13, 2023.

The company encourages you to refer to the company's MD&A (management's discussion and analysis) and quarterly unaudited financial statements for Sept. 30, 2022, the annual audited financial statements for the year-ended Dec. 31, 2021, as well as other disclosures available under the company's profile at SEDAR for additional information.

About Pender Growth Fund Inc.

Pender Growth Fund is an investment firm. Its investment objective is to achieve long-term capital growth. The company utilizes its small capital base and long-term horizon to invest in unique situations, primarily small cap, special situations, and illiquid public and private companies. The firm invests in public and private companies based primarily in Canada and the United States, principally in the technology sector. It trades on the TSX Venture Exchange under the symbol PTF and posts its NAV on its website, generally within five business days of each month-end.

We seek Safe Harbor.

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