Investment Pitches

Pitch Summary:
ICON plc, the world's largest contract research organization, delivered top and bottom-line results that exceeded expectations. Improving bookings growth pointed to stabilization and potentially recovery after a challenging past 12 months— a period in its customer base tightened R&D outlays. We added to our position as we believe the cyclical slowdown in healthcare could be ending and that ICON is poised to return to steady, low double-digit EPS growth. To us, ICON remains a best-in-class operator in an essential category, and we view trailing twelve months' share price movements as disconnected with fundamental performance.

BSD Analysis:
Polen Capital demonstrates strong conviction in ICON plc, viewing the company as the world's largest and best-in-class contract research organization positioned for a cyclical recovery. The manager highlights that ICON exceeded both revenue and earnings expectations while showing improving bookings growth, signaling potential stabilization after a challenging 12-month period of reduced R&D spending by pharmaceutical clients. Polen increased their position size, indicating high confidence that the healthcare industry's cyclical downturn is ending and that ICON will resume steady low double-digit earnings growth. The fund views recent share price weakness as disconnected from the company's strong fundamental performance, suggesting an attractive entry point. Polen emphasizes ICON's essential role in the pharmaceutical development ecosystem and its market-leading position. The manager appears to view this as a compelling opportunity to add exposure to a high-quality healthcare services company at an attractive valuation during a cyclical trough.

Pitch Summary:
ASML finished the quarter strong, with the stock up significantly in September. Semiconductor capital equipment ("semi-cap") companies benefitted from investor optimism around AI. Advanced chips are central to AI and ASML's equipment is essential to printing advanced logic and volatile memory chips. Concerns about a slowdown in the memory chip industry and about Intel waned during the quarter, helping lift semi-cap stocks.

BSD Analysis:
Polen Capital maintains a positive outlook on ASML, viewing the company as a critical enabler of the artificial intelligence revolution through its advanced semiconductor manufacturing equipment. The manager emphasizes ASML's essential role in producing the advanced logic and memory chips that power AI applications, positioning the company as a key beneficiary of the ongoing AI boom. The commentary suggests that previous concerns about memory chip industry slowdowns and Intel-specific issues have diminished, creating a more favorable operating environment for semiconductor capital equipment companies. Polen appears to view ASML's technology as irreplaceable in the production of cutting-edge semiconductors. The strong September performance reflects renewed investor confidence in the AI-driven semiconductor cycle. The fund likely sees ASML as well-positioned to benefit from the continued advancement and proliferation of AI technologies requiring increasingly sophisticated chip manufacturing capabilities.

Pitch Summary:
Shopify represented the top contributor to relative and absolute performance in the third quarter of 2025. The company reported very strong results showcasing accelerating revenue and gross merchandise volume growth. The company has made investments in its enterprise business, offline point of sale business, B2B, international growth and AI—all of which continue to drive value for merchants and make the business more durable.

BSD Analysis:
Polen Capital maintains a bullish stance on Shopify following strong Q3 2025 results that demonstrated accelerating revenue and gross merchandise volume growth. The manager highlights the company's strategic investments across multiple growth vectors including enterprise solutions, offline point-of-sale systems, B2B capabilities, international expansion, and artificial intelligence integration. These diversification efforts are viewed as value-creating initiatives that enhance merchant utility while strengthening the platform's competitive moat. The commentary suggests Shopify's business model is becoming increasingly durable through these strategic investments. Polen views the company as well-positioned to continue benefiting from the ongoing digital commerce transformation. The fund's conviction appears reinforced by the strong operational execution demonstrated in the recent quarter. This represents a core holding in their concentrated international growth strategy.

Pitch Summary:
TransMedics Group provides the Organ Care System (OCS) platform, a portable, near-physiologic system that keeps donated hearts, lungs, and livers functioning outside the body with warm, oxygenated blood to optimize organ quality, assess viability, and extend transport time for transplants.This technology offers a significant improvement on traditional static cold storage, in turn enabling greater access to life-saving transplants for patients with end-stage organ failure. During the quarter, the stock gave back some of its strong performance from the first half of the year when it was up significantly.

BSD Analysis:
The manager presents TransMedics as a transformative medical technology company addressing critical limitations in organ transplantation. The Organ Care System represents a paradigm shift from static cold storage to dynamic organ preservation, potentially expanding the donor pool and improving transplant outcomes. The technology's ability to assess organ viability and extend transport time addresses key bottlenecks in the transplant process, suggesting significant market opportunity given organ shortage constraints. The platform approach across multiple organ types (hearts, lungs, livers) provides diversification and scalability. However, the recent stock decline after strong first-half performance indicates volatility and potential valuation concerns. The life-saving nature of the technology provides strong clinical value proposition, but adoption may face regulatory and reimbursement challenges typical of innovative medical devices. This represents a high-impact healthcare innovation with substantial long-term potential but near-term execution risk.

Pitch Summary:
Carpenter Technology is a leading manufacturer of high-performance specialty alloy-based materials used for critical applications in the aerospace/defense, medical, and energy industries. The company is executing a multi-year strategy to transform from a commodity metals and materials supplier into an aerospace focused supplier of value-added parts. Profit margins have been rising as the transformation has progressed. During the quarter, the stock declined on revenue growth coming in slightly below expectations.

BSD Analysis:
The manager outlines a compelling transformation story for Carpenter Technology, transitioning from low-margin commodity metals to high-value aerospace components. The strategic shift toward aerospace-focused value-added parts represents a significant margin expansion opportunity, with the manager noting rising profitability as evidence of successful execution. The company's specialty alloys serve critical applications in aerospace/defense, medical, and energy sectors, providing exposure to multiple growth markets with high barriers to entry. The aerospace focus aligns with the broader industry recovery and long-term growth in commercial aviation. However, the recent stock decline on modest revenue disappointment suggests execution risk and market sensitivity to near-term performance. The multi-year transformation timeline indicates this is a longer-term value creation story requiring patience. The specialty materials focus provides differentiation and pricing power in niche applications.

Pitch Summary:
Oddity Tech is a digital beauty and wellness platform thatuses AI and data science to develop and recommend personalized products based on unique skin type and color signatures. They have been able to scale their brands more profitably going direct-to-consumer and owning that consumer relationship has helped develop brand loyalty and repeat business. Currently the company operates under two cosmetics brands—Il Makiage and SpoiledChild—and recently announced it would be launching a third brand in the medical-grade skincare business. The stock sold off in the period as results came in shy of elevated expectations.

BSD Analysis:
The manager presents a mixed view of Oddity Tech, acknowledging the company's innovative AI-driven personalization platform while noting recent execution challenges. The investment thesis centers on Oddity's data science approach to beauty and wellness, using skin type and color analysis to drive product recommendations and customer engagement. The direct-to-consumer model provides higher margins and valuable customer data, creating a competitive moat through personalized experiences. The manager highlights the success of Il Makiage and SpoiledChild brands, with expansion into medical-grade skincare representing additional growth opportunities. However, the recent stock decline reflects execution risk as results fell short of elevated market expectations. This suggests valuation sensitivity and the challenge of maintaining high growth rates in a competitive digital beauty market. The platform approach across multiple brands indicates scalability potential but requires consistent execution.

Pitch Summary:
Powell Industries makes custom-engineered systems typically geared toward power control systems at large industrial complexes. The company is benefitting from the continuous rise in data center capex spending, as they are a critical supplier of switchgear that takes power off the grid and helps to protect expensive equipment and minimize downtime. Additionally, if we continue to see a trend towards more onshoring of manufacturing in the US, these industrial facilities will require switchgear systems to safely and effectively move electricity around.

BSD Analysis:
The manager presents Powell Industries as a direct beneficiary of two powerful secular trends: data center expansion and manufacturing onshoring. The company's specialized switchgear systems are critical infrastructure components that protect expensive data center equipment and ensure reliable power distribution. The manager emphasizes Powell's role as a "critical supplier" in the data center capex cycle, positioning the company to benefit from continued AI-driven infrastructure investment. The onshoring thesis provides a secondary growth driver as domestic manufacturing facilities require sophisticated electrical systems. Powell's custom-engineered approach suggests higher margins and customer stickiness compared to commodity electrical equipment. The focus on mission-critical applications (protecting expensive equipment, minimizing downtime) indicates strong pricing power and recurring revenue potential. This represents a picks-and-shovels play on the broader electrification and digitalization trends.

Pitch Summary:
Joby Aviation is the leading company in the emerging electric vertical takeoff and landing ("eVTOL") segment—a new class of aircraft that use electric motors and batteries to fly. eVTOLs help to solve the growing issues around urban traffic congestion, slow ground transportation, and the environmental impact of traditional aviation by providing faster, quieter, and cleaner aerial transit that doesn't require long runways. The cost to manufacture and operate these eVTOLs is relatively inexpensive as compared to helicopters, for instance, and at scale this should become a viable alternative to requesting an Uber to the airport. During the period, the stock benefitted from excitement around testing longer-range flights, as well as from the announcement of the acquisition of Blade Air Mobility's passenger business.

BSD Analysis:
The manager positions Joby Aviation as the leader in the transformative eVTOL market, addressing multiple urban mobility pain points simultaneously. The investment thesis centers on Joby's first-mover advantage in electric vertical aviation, targeting urban air mobility as a solution to traffic congestion and transportation inefficiency. The manager highlights the cost advantage versus helicopters and the scalability potential, suggesting a path to mass market adoption. Recent operational milestones including longer-range flight testing demonstrate technical progress, while the Blade Air Mobility acquisition provides immediate access to existing passenger operations and infrastructure. The comparison to Uber suggests a platform-based business model with significant network effects potential. This represents a high-conviction bet on next-generation transportation technology with substantial addressable market opportunity in urban mobility.

Pitch Summary:
Bloom Energy is a provider of solid oxide fuel cells that play a critical role in delivering clean, reliable, "always on" power at scale. AI data centers require an enormous amount of power and one of the key challenges to date has been the inability of power grids to supply the necessary electricity to meet the constant and growing demands from AI workloads. Bloom's "EnergyServer" fuel cells help address this issue,generating cost-efficient, reliable power onsite, converting fuels like natural gas, biogas and hydrogen into electricity without combustion. During the quarter, the company announced a massive partnership with Oracle to deliver onsite power to select data centers that caught investors' attention and spurred a wave of analyst earnings revisions.

BSD Analysis:
The manager presents a compelling bull case for Bloom Energy centered on the AI-driven power demand surge. The thesis hinges on Bloom's solid oxide fuel cells solving a critical infrastructure bottleneck for AI data centers, which require massive, reliable power that traditional grids struggle to provide. The Oracle partnership represents a significant validation and catalyst, demonstrating enterprise adoption of Bloom's onsite power generation technology. The manager emphasizes the "always on" reliability advantage and fuel flexibility (natural gas, biogas, hydrogen) as key differentiators. This positions Bloom Energy as a direct beneficiary of the AI revolution's infrastructure requirements. The earnings revision wave following the Oracle announcement suggests institutional recognition of the growth opportunity. The investment thesis aligns with broader electrification trends driven by AI, electric vehicles, and data center proliferation.

Pitch Summary:
Talen Energy is one of the largest power generation companies in North America with 10.7GW of total power generation, including 2.2GW at its Susquehanna, PA nuclear power plant. As the tech industry continues its aggressive buildout of data centers for running AI workloads, it is driving the biggest increase in electricity demand in decades. This in turn has spurred a race among energy companies to develop and acquire operational gas-fired plants, which are capable of providing round-the-clock power, unlike intermittent solar and wind. Along these lines, the stock reacted positively to the news in July that Talen Energy agreed to a $3.8B deal— the fourth big deal of the year—for two relatively new, favorably located gas fired power plants in Pennsylvania and Ohio.

BSD Analysis:
Polen Capital presents a strong bull case for Talen Energy based on the company's strategic positioning in the AI-driven electricity demand surge. The manager emphasizes Talen's substantial scale with 10.7GW of generation capacity, including valuable nuclear assets that provide reliable baseload power. The thesis centers on the unprecedented electricity demand growth from AI data center buildouts, which requires consistent, round-the-clock power that intermittent renewables cannot provide. Talen's focus on acquiring operational gas-fired plants positions the company to capitalize on this demand premium for reliable power generation. The $3.8B acquisition of Pennsylvania and Ohio gas plants demonstrates management's aggressive expansion strategy and validates the strong M&A environment in the power sector. The manager notes this was the fourth major deal of the year, indicating robust industry consolidation and asset values. Talen's geographic positioning in favorable markets and diverse generation portfolio make it a key beneficiary of the structural shift in electricity demand driven by AI infrastructure investment.

Pitch Summary:
SoFi Technologies started its life in 2011 as a student loan refinancer and has rapidly evolved into a full-service digital banking platform. The company has been successful using a "land and expand" approach that both drives new customer acquisition and more dynamic relationships with those customers. This has translated into strong membership growth and in turn strong revenue growth, which has not gone unnoticed by the market this year.

BSD Analysis:
Polen Capital highlights SoFi's successful transformation from a single-product student loan refinancer to a comprehensive digital banking platform. The manager emphasizes the effectiveness of SoFi's "land and expand" strategy, which focuses on acquiring customers through one product and then cross-selling additional financial services. This approach has driven strong membership growth and revenue expansion, demonstrating the company's ability to deepen customer relationships and increase lifetime value. The digital-first model positions SoFi well against traditional banks by offering superior user experience and lower operational costs. The manager notes that the market has recognized this progress, with the stock performing well during the year. SoFi's evolution represents a successful fintech disruption story, leveraging technology to build a modern financial services ecosystem. The company's growth trajectory appears sustainable given the large addressable market for digital banking services and ongoing customer acquisition momentum.

Pitch Summary:
Bloom Energy is a provider of solid oxide fuel cells that play a critical role in delivering clean, reliable, "always on" power at scale. AI data centers require an enormous amount of power, and one of the key challenges to date has been the inability of power grids to supply the necessary electricity to meet the constant and growing demands from AI workloads. Bloom's "EnergyServer" fuel cells help address this issue, generating cost-efficient, reliable power onsite, converting fuels like natural gas, biogas and hydrogen into electricity without combustion. During the quarter, the company announced a massive partnership with Oracle to deliver onsite power to select data centers that caught investors' attention and spurred a wave of analyst earnings revisions.

BSD Analysis:
Polen Capital presents a compelling bull case for Bloom Energy centered on the company's strategic positioning in the AI infrastructure buildout. The manager highlights a critical bottleneck in AI data center expansion: the inability of traditional power grids to meet the massive electricity demands of AI workloads. Bloom's solid oxide fuel cell technology addresses this challenge by providing reliable, on-site power generation that converts various fuels into electricity without combustion. The Oracle partnership represents a significant validation of Bloom's technology and market opportunity, driving analyst upgrades and investor attention. This positions Bloom Energy as a key beneficiary of the accelerating AI infrastructure investment cycle. The manager's thesis aligns with broader electrification trends and the strategic importance of AI development in the US-China geopolitical competition. The company's "always on" power solution differentiates it from intermittent renewable sources, making it particularly valuable for mission-critical AI applications.

Pitch Summary:
Very attractive valuations can be found in countries that are not usually on investors' menu. One of our other top performers, Halyk Bank in Kazakhstan, saw its share price strengthen by 43% during the quarter. Halyk has an internal return on capital of more than 30%, but trades at a price-earnings multiple of only 2 times. It currently also offers a dividend yield of 16%. Of course, Halyk is a small position in our portfolios; we are all too aware of geopolitical risks. But our portfolios are refined to reduce political risks through diversification. The purpose of diversification is not to eliminate risks, but precisely to accommodate specific, unrelated risks.

BSD Analysis:
The manager identifies Halyk Bank as an exceptional value opportunity in Kazakhstan's overlooked market, delivering 43% quarterly returns despite trading at only 2x earnings. The bank demonstrates remarkable operational efficiency with internal returns on capital exceeding 30%, suggesting strong management execution and market positioning. The 16% dividend yield provides substantial income while waiting for valuation re-rating, creating an attractive risk-adjusted return profile. The manager acknowledges geopolitical risks inherent in Kazakhstan but maintains the position as part of a diversified emerging markets strategy. The investment reflects the manager's philosophy of finding exceptional businesses in non-consensus markets where valuations remain depressed due to perceived risks rather than fundamental problems. The small position size demonstrates prudent risk management while capturing upside from extreme valuation discounts. The bank represents the manager's broader thesis that attractive opportunities exist in frontier markets ignored by mainstream investors.

Pitch Summary:
Banco Macro in Argentina rose by 48% in Dollar terms and Banco do Brasil by 36%. The recent controversial election of leftist Lula da Silva has made markets nervous about Brazil's future. In retrospect, however, that appears to have presented a buying opportunity (and which we took advantage of). Brazil currently generates large trade surpluses, its debt to GDP is under control, and its inflation rate is currrently as low as 3%. Brazil was one of the few countries that raised interest rates early to cope with the post-Covid inflation wave. Interest rates in Brazil are currently at 13.75%. The Real is far too attractive and during 2023 the currency has already strengthened by 9% against the US Dollar. We bought Banco do Brasil at a price-earnings multiple of 3, almost 70% cheaper than the valuation of its US peers.

BSD Analysis:
The manager presents a compelling contrarian case for Banco do Brasil, purchased at an extremely attractive 3x price-earnings multiple—approximately 70% cheaper than US banking peers. The investment capitalizes on market nervousness following Lula da Silva's election, which the manager views as creating an exceptional buying opportunity. Brazil's fundamental economic position appears strong with large trade surpluses, controlled debt-to-GDP ratios, and inflation at just 3%. The manager highlights Brazil's proactive monetary policy, having raised rates early to combat post-COVID inflation, with current rates at 13.75% providing attractive real yields. The Brazilian Real's 9% strengthening against the dollar in 2023 validates the manager's currency thesis and enhances dollar-denominated returns. The 36% quarterly performance demonstrates the market's recognition of the bank's undervaluation. The position reflects the manager's strategy of identifying quality financial institutions trading at deep discounts due to temporary political concerns rather than fundamental deterioration.

Pitch Summary:
The biggest contribution to the Global Creator's performance during the second quarter of 2023, however, came from South America where we have built an exposure of 7.1% of the fund. Banco Macro in Argentina rose by 48% in Dollar terms and Banco do Brasil by 36%. The recent controversial election of leftist Lula da Silva has made markets nervous about Brazil's future. In retrospect, however, that appears to have presented a buying opportunity (and which we took advantage of). In Argentina, general elections have been scheduled to be held on 22 October 2023. According to election polls, free market reformers are the frontrunners in this political race. Perhaps Argentines are finally fed up with the empty promises of all its previous socialists rulers. If elected, a reformer will have to inject strong medicine into Argentina's economy. If it is willing to swallow bitter pills, Argentina could become one of the best economic growth stories of the next decade(s).

BSD Analysis:
The manager demonstrates strong conviction in Banco Macro as part of a strategic 7.1% South American allocation, with the position delivering exceptional 48% dollar-denominated returns during the quarter. The investment thesis centers on Argentina's potential political transformation, with free-market reformers leading election polls scheduled for October 2023. The manager believes Argentines have grown weary of socialist policies and are ready for economic reform, creating a compelling contrarian opportunity. The bank represents a leveraged play on Argentina's economic recovery potential, positioned to benefit from structural reforms and policy normalization. The manager acknowledges that successful reform implementation will require difficult economic medicine but views this as necessary for unlocking Argentina's growth potential. The timing appears strategic, capitalizing on political uncertainty and depressed valuations ahead of potential regime change. The position reflects the manager's broader emerging markets strategy of identifying undervalued assets in countries poised for positive political and economic transformation.

Pitch Summary:
Further, the uranium market seems to have finally woken up, and Cameco Corporation, our third largest position, added 19.9%. We have three uranium positions that collectively account for about 7% of the fund. The uranium market deserves much more attention than it is getting. All we need to say for now is that this market is in the early stages of a contract cycle in which price-insensitive nuclear plants have to negotiate for a limited amount of uranium production. While Western policy makers are getting to grips with the limitations of solar and wind power, the rest of the world is busy building nuclear stations—and even starting to use coal again. The last decade's misappropriation of capital in the global energy sector have given rise to great opportunities in certain sub-sectors such as the uranium market.

BSD Analysis:
The manager expresses strong conviction in Cameco Corporation as the fund's third-largest position, which delivered exceptional performance with a 19.9% gain during the quarter. The uranium thesis centers on a structural supply-demand imbalance as nuclear plants enter a new contract cycle with limited uranium production capacity. The manager emphasizes that price-insensitive nuclear utilities must negotiate for scarce uranium supplies, creating favorable pricing dynamics. The investment case is strengthened by global nuclear capacity expansion outside Western markets, while Western policymakers reassess renewable energy limitations. The manager views uranium as benefiting from a decade of capital underinvestment in the broader energy sector. Cameco represents the manager's largest single uranium exposure within a broader 7% uranium allocation across three positions. The timing appears strategic as the uranium market emerges from a prolonged downturn into what the manager characterizes as an early-stage contract cycle.

Pitch Summary:
Range Resources (2.6% of the fund), based in Pennsylvania and a giant in the natural gas industry, added 11%. Further, the uranium market seems to have finally woken up, and Cameco Corporation, our third largest position, added 19.9%. We have three uranium positions that collectively account for about 7% of the fund. The uranium market deserves much more attention than it is getting. All we need to say for now is that this market is in the early stages of a contract cycle in which price-insensitive nuclear plants have to negotiate for a limited amount of uranium production. While Western policy makers are getting to grips with the limitations of solar and wind power, the rest of the world is busy building nuclear stations—and even starting to use coal again. The last decade's misappropriation of capital in the global energy sector have given rise to great opportunities in certain sub-sectors such as the uranium market.

BSD Analysis:
The manager highlights Range Resources as a significant natural gas player that delivered strong performance with an 11% gain during the quarter. The fund maintains a 2.6% position in this Pennsylvania-based natural gas giant, positioning it within the broader energy sector allocation of 30% of the fund. The manager's bullish stance on energy appears driven by structural market dynamics and capital misallocation over the past decade. Range Resources benefits from the manager's thesis that energy sector underinvestment has created compelling opportunities in specific sub-sectors. The natural gas focus aligns with the manager's view that traditional energy sources are gaining renewed importance as policymakers recognize limitations of renewable alternatives. The position represents a tactical play on energy market recovery and structural supply-demand imbalances. The manager's confidence in the energy sector is reinforced by strong performance despite broader market headwinds affecting technology stocks.

Pitch Summary:
Our success in Satsuma Pharmaceuticals was more rewarding, as I luckily built a position in the stock, at an average cost of $0.68 per share, days before Shin Nippon Biomedical Laboratories Ltd (SNBL) of Japan announced, on April 17th, an offer to buy the remaining shares, (they owned 8% of the company at the time), for $0.91 per share with a CVR on Satsuma's drug pipeline. The shares spiked above $1.20 on the news, on the possible assumption that the deal may be sweetened before it was all said and done. We exited our position at $1.15 that day. It was our top-performing position in this quarter with a 1.1% contribution to quarterly results.

BSD Analysis:
The manager achieved exceptional timing in Satsuma Pharmaceuticals, entering at $0.68 per share just days before SNBL's takeover announcement at $0.91 plus a contingent value right (CVR). The 34% premium offer from SNBL, which already owned 8% of the company, validated the intrinsic value of Satsuma's migraine drug pipeline. Market speculation of a potential bidding war drove shares above $1.20, allowing the manager to exit at $1.15 for a 69% gain. The position contributed 1.1% to quarterly performance, making it the fund's top performer. This investment demonstrates the manager's ability to identify undervalued biotech assets ahead of strategic acquirer interest, capitalizing on both the fundamental value and takeover premium dynamics in the sector.

Pitch Summary:
In September of last year, I built a small position in Metacrine which was being circled by activist investors and had recently received an all-stock merger proposition from Equillium. In April of 2022, Metacrine laid off 83% of their workforce, following the resignation of their Chief Medical Officer in December 2021, leaving only 6 full-time employees! Metacrine was clearly looking to turn off the lights as their research had not yielded any promising results on new and innovative drugs. The company had its IPO in September 2020 at $14.34 per share, but now the stock was languishing below $0.50 per share. However, at the time, Metacrine had about $37 million in net cash. Equillium was looking to extend its shelf life, as they too were running out of cash but had more promising drugs in their pipeline (with some in clinical trials). Equillium estimated $33 million could be garnered in the deal which would provide operational breathing room for the company into 2024. In fact, they wanted the cash so badly that they were willing to overpay for it—25% more. The catch was that Equillium wanted to pay with their stock and they, interestingly, put a collar on the deal based on Equillium's stock price of $2.21 to $2.70. In other words, the amount of Equillium stock Metacrine shareholders would receive was dependent on the closing share price of Equillium shares at the time of the merger. Based on my calculations, a closing share price of $2.21 valued Metacrine at $0.61 per share (on the low end), and a closing price of $2.70 valued the company at $0.75 per share (on the high end). If Equillium's shares traded higher than $2.70 at the time of closing, it would have been an even better deal; if they traded below $2.21, it would have been a worse deal. The merger was based on shareholder approval. I built a small position at $0.45 per share. In December the deal was set for a vote and because Equillium's share price had fallen well below $2.21, we voted against the proposed merger along with the other activists in the stock. On December 23rd, Metacrine announced that the merger was terminated due to a lack of shareholder support. With the deal scuttled, Metacrine set about planning for a self-liquidation, and on June 26th we received $0.58 per share—which was on the low side of their previously announced estimates. In 9 months we made about 28% (or 40% annualized) on the deal.

BSD Analysis:
The manager executed a successful activist coattail strategy in Metacrine, a distressed biotech company trading below its net cash value. With $37 million in cash and minimal operations after massive layoffs, Metacrine represented a classic liquidation play. The manager astutely recognized that Equillium's merger offer at a 25% premium to cash was attractive, but when Equillium's stock price collapsed below the collar threshold, voting against the deal became the optimal strategy. This forced Metacrine into self-liquidation, delivering a 28% return in 9 months. The investment exemplifies disciplined special situations investing, where the manager leveraged activist involvement to extract value from a cash-rich shell company. The 40% annualized return demonstrates the effectiveness of identifying mispriced liquidation scenarios in distressed biotech names.

Pitch Summary:
Our most interesting and unusual addition this quarter comes from the Expert Market, the opaque and illiquid over-the-counter market to which non-reporting companies were banished following the SEC rule change of September 2021. The fund is now the proud owner of 12 shares of one of the market's highest-priced securities: Mechanics Bank of Richmond, a special situation that I believe will earn us twice our investment at some point in the next 2-3 years. Mechanics is the project of legendary bank investor Gerald J. Ford. Mr. Ford began acquiring banks in the 70s and burnished his reputation in the aftermath of the Savings and Loan Crisis, acquiring many troubled institutions and ultimately selling at a gigantic profit. Mr. Ford is still active in banking investments, including through the Ford Financial Funds. In 2015, Ford Financial Fund II acquired a majority stake in Mechanics, paying $26,832 per share. Under Ford's control, Mechanics performed a few smaller acquisitions, then a very large one in 2019, purchasing assets from Rabobank's North American subsidiary for $2.1 billion. Mechanics funded the acquisition in part from a rights offering at $38,000 per share, in which virtually all the rights were exercised by Ford Financial Fund II and Ford Financial Fund III. Following the rights exercise and acquisition, the Ford Financial entities owned 79% of shares outstanding and Rabobank owned 9.9%. At year-end 2015, Mechanics had $3.5 billion in assets and $353 million in tangible equity capital. Here we stand 8 years later and the bank has grown into an $18 billion giant with $1.2 billion in tangible equity capital. The bank is significantly larger and more profitable yet shares trade sporadically in the expert market at just over $23,000. This is a discount to Ford Financial Fund's 2015 purchase price and a huge discount to the rights offering done just 3 years ago. Now, it's certainly possible that Mechanics overpaid for the Rabobank assets. It is also possible that Ford was over-valuing Mechanics shares in the 2019 rights offering, but I doubt they were far off. We are talking about a highly sophisticated investor who has seen several banking cycles. I think it's far more likely that Mechanics shares are trading well below intrinsic value due to their expert market status and minimal liquidity. We are nearing the 10-year mark for Ford Financial Fund II's investment in Mechanics, during which Ford Financial has successfully built the bank's scale and boosted its profitability. At some point, they will want to exit their investment. Now is not a particularly easy time for banks, so I am not looking for an IPO or sale announcement soon, but conditions will change. When they do, I expect Mechanics Bank of Richmond shares to change hands at no less than $40,000 per share and possibly a good deal more. For now, I am very happy to own shares at 7x earnings and a scant premium to tangible book value.

BSD Analysis:
The manager presents a unique special situation in Mechanics Bank of Richmond, controlled by legendary bank investor Gerald J. Ford, trading on the illiquid Expert Market. The investment thesis relies on a significant valuation disconnect, with shares trading at $23,000 despite Ford's 2015 acquisition at $26,832 and a 2019 rights offering at $38,000 per share. The bank has transformed dramatically under Ford's stewardship, growing from $3.5 billion to $18 billion in assets while increasing tangible equity from $353 million to $1.2 billion over eight years. Current valuation metrics appear compelling at 7x earnings and near tangible book value, especially given Ford's track record and sophisticated approach to banking investments. The catalyst for value realization centers on Ford Financial's eventual exit strategy as they approach the 10-year mark of their investment cycle. While banking sector headwinds may delay monetization, the manager's target of $40,000+ per share represents substantial upside potential. The Expert Market listing creates artificial illiquidity that likely depresses valuation, presenting an opportunity for patient capital.