Same Share, Three Prices: What ProVen VCT's Boring Equity Issue Really Is

On 11 September a London-listed company called ProVen VCT did what it does every few weeks, and announced it in about as dry a sentence as corporate life produces: it issued equity, allotting a little over 1.1 million new shares at 61.41p each. A company selling shares — nothing strange there. Except that the announcement came a month after a nearly identical one, and both are the outward pulse of a machine built not around a business but around a tax classification. Figure out what a "VCT" is, and the boring share issue stops being boring.

A venture capital trust is a listed company that is also a government-approved tax wrapper. It pools investor money, buys stakes in small, early-stage UK businesses, and in exchange for pointing capital at them HMRC lets subscribers take up-front income-tax relief on the purchase, keeps their dividends tax-free, and waives capital-gains tax on the way out. The relief is the product — the familiar 30%, trimmed to 20% for new subscriptions from April 2026, on up to £200,000 a year.

That wrapper explains the first odd number in the announcement. ProVen priced its new shares at 61.41p against an adjusted net asset value of 57.9p — it sold brand-new shares for roughly 6% more than the underlying portfolio is worth. Normally issuing shares above NAV is the kind of thing that only happens if you can convince people the assets are undervalued. Here it's automatic, because of who the real payer is.

Why anyone pays more than NAV for a new share

Subscribe £100 of new VCT shares and the government gives back £20 to £30 of it. A 6% premium over NAV is pocket change next to that. So the VCT can charge above net asset value for an entrance ticket into the wrapper, and the subscriber pays it gladly — but only because the tax authority is effectively covering the bill. New money comes in above NAV, which means the issue doesn't erode the existing shareholders' net asset value the way a discount-to-NAV fund raise would. That premium is the machine protecting itself while it grows.

Now the second odd thing: the same share costs less in the market. ProVen quotes on the London market around 55.5p–58.5p, a bit below its roughly 58p–59.5p NAV. Two prices, one security, no arbitrage between them.

The relief is personal, and that changes the price

The reason there's no arbitrage is the single most important fact about VCTs, and it violates the usual "buy a fund at NAV" instinct. The tax relief is personal, not structural. It attaches to a specific subscriber who subscribes new shares and holds them for five years; sell before then and the relief is clawed back. It does not transfer when shares change hands. So when you buy second-hand VCT shares on the open market, you inherit the assets and none of the subsidy — and you therefore demand a discount to compensate for owning a small, illiquid, private-equity portfolio with no government carrot attached.

The same legal instrument trades at 61.41p to a new-issue subscriber and at ~57p to a market buyer because these are, in economic effect, two different products wearing one ticker. The tax benefit is an attribute of the original owner, not of the share. It's the cleanest possible version of a classification boundary: same security, three prices — new-issue price, market price, and net asset value.

The machine, in its two modes

That's why there are two kinds of "equity issue," and ProVen did both within a month. In August, it paid its 1.6p final dividend on the 14th, then immediately reissued 1.25 million shares at 59.5p — the exact post-dividend NAV — to shareholders who elected to roll the cash back in. That's the Dividend Reinvestment Scheme, and it's not really a payout to the outside world: the money goes out one door and comes back the next. The wrapper's deal is that it hands its gains out as tax-free dividends; the DRIS lets the shareholder turn that cash dividend straight back into new shares that carry their own fresh relief (counted against the same £200,000 limit). The envelope stays full.

September's 1.1 million-share issue was the other mode: fresh money, at a premium, raised to be deployed into new early-stage companies. One machine, two taps.

So how is the machine running? ProVen's NAV was 60.5p at its February year-end, down from 62.9p a year before — about a 1.4% decline once the year's dividends are added back, i.e. roughly flat. It paid 3.1p of tax-free dividends over the year, a cash yield of about 5.1% on the opening NAV. Since launch the fund has produced 151.25p of NAV plus dividends, about 90.75p of it paid out. This isn't a collapse story. It's the normal rhythm of a fund that distributes, stays roughly level, and keeps topping itself up through this issue machinery.

For many readers this is a machine you can look at but not touch: VCTs are UK products, the relief is UK income-tax relief, most US platforms don't list them, and anyone who isn't a UK taxpayer gets none of the subsidy that makes the arithmetic work. The general lesson travels better than the ticker. Whenever a security's value depends on a tax or regulatory label that belongs to its owner rather than to the asset, the same share can genuinely carry multiple prices at once — and the price that matches the assets (NAV) is not necessarily the price anyone new can enter at. Your spread between what you pay and what you're really entitled to is the price of the wrapper. It's the only price worth negotiating.