Recent market volatility has caused some stocks to decline in value. This has compounded the drop in some shares that were already struggling coming into 2026. One FTSE 250 company is now down 30% in the past six months, but people need to know the full story behind the cheap stock before making a decision. Here’s why.
Key details
I’m talking about Chrysalis Investments Limited (LSE:CHRY). Chrysalis is one of those investment trusts that sounds complicated at first glance, but the core idea is actually quite simple. It backs fast-growing, private companies before (and sometimes after) they hit the stock market. It has a good track record, with a portfolio that includes names like Starling Bank and Klarna.
To understand why I can say it’s cheap right now, we need to grasp the concept of net asset value (NAV). Chrysalis invests in high-growth firms at earlier stages, then hopes to realise gains when those businesses are revalued higher or go public. In practice, that means its NAV rises when portfolio companies perform well. Given that most of the assets are unlisted, it can be tricky to get an accurate NAV, but ultimately, the share price should track the NAV movements within a few percentage points.
Right now, the share price trades at almost half the NAV. That’s a huge discount. If those valuations prove accurate, there’s potential for that discount to really narrow as the share price appreciates. That’s why I can see why some feel it’s seriously undervalued at the moment.
Pause for thought
Last month, the company received almost unanimous shareholder support for a big shift in investment policy. The FTSE 250 stock has effectively admitted that its original growth strategy isn’t working as planned. It’s now shifting into a wind-down mode, meaning no new investments and a focus on selling existing holdings and returning cash over the next three years.
On the positive side, a successful disposal programme, especially if major assets like Starling or Klarna achieve good valuations, could see the share price surge over the next couple of years. Even though Klarna is now public, Chrysalis has retained the holding and will presumably sell it when it believes the time is best. But the risks are hard to ignore. Chrysalis is no longer growing, its future depends heavily on market conditions for asset sales. There’s also the risk around having to wind down efficiently in the coming years.
When I look to invest in a business, I want the outlook to be upbeat and positive. In this case, I already know the end goal. Sure, an investor could bank some solid returns over the next three years. But it doesn’t change the fact that this isn’t really a long-term investment. With that time horizon and the risks involved, I think I can find better and more sustainable stock picks in the market. Although some investors might be happy to take on the risk, it’s not one I’m willing to contemplate.
