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Class to dump MDA investment

The SMSF technology platform has decided to either convert or redeem its $3.1 million investment in Philo Capital Advisers after concluding it is not in the best interest of its shareholders.

Class previously made the investment prior to the introduction of its reimagination strategy by chief executive Andrew Russell in 2019.

However, prior to the maturity date of the note on June 30, Class determined that continuing to invest in Philo Capital is not in the best interests of Class shareholders.

"Although Class acknowledges the growth opportunity in the MDA space, the Philo Capital business model is not focused on delivering world-class technology to the wealth accounting ecosystem," Class said in a statement.

Russell added: "Philo Capital is not profitable yet and requires further investment over the coming years for it to scale. It is therefore not in the best in interests of shareholders to continue to invest in Philo Capital, given the other significant growth opportunities for Class to allocate capital for revenue and profit growth in FY22 and beyond."

The conversion/redemption period ends on 31 August 2021 with Class currently reviewing whether to convert or redeem the note.

Class' investment in Philo Capital currently stands at $3.4 million including capitalised interest and it is expected there will be a shortfall of around $3 million in value under either scenario.

Class noted that it will make a fair value negative adjustment in its FY21 financial statements. Despite this, it remains on track to deliver its revenue and underlying EBITDA targets.

Philo Capital did not respond to a request for comment.

Read more: ClassPhilo Capital AdvisersAndrew Russell