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How to Own Twitter Before Its IPO

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Don't you wish you could get some exposure to Twitter now before it goes public? If you could combine that exposure with Facebook, wouldn't that be better? This kind of exposure is possible with an investment in GSV Capital (NASDAQ: GSVC  ) . GSV Capital is structured as a public private-equity fund. As opposed to many of its competitors, such as MVC Capital,   (NYSE: MVC  ) the company has stakes in both Twitter and Facebook (NASDAQ: FB  ) .

Twitter stake
GSV Capital's largest position is Twitter, the social networking company that allows users to post comments up to 140 characters in length. This position is valued at $38 million as of June 30, but this value could go up significantly now that Twitter has announced its intention to go public. There have been a wide range of estimates as to Twitter's value on the public markets, but we can say for certain that there should be high demand from retail investors for the stock. Furthermore, once the stock can trade freely on the public markets, the liquidity premium should be reduced, creating a higher valuation for the company. Investing in GSV Capital is the best way to gain exposure to Twitter before it goes public.

Facebook stake
GSV Capital was also one of the venture capital companies to make an investment in Facebook before it went public. The stake in Facebook is valued at $9 million, but that was before the recent 90% upward move in the stock-- add another $8 million to the value of this position. Not only do you get to play Twitter by buying GSV Capital, you also get to participate in the upside of Facebook.

Exposure to other technology names
Along with positions in Twitter and Facebook, the company has several other positions:

Company Value Description
Palantir $23 million Big Data
Dropbox $15 million Cloud Storage
Control4 $7.5 million Control Solutions
Violin Memory $14 million Big Data
Chegg $14 million Textbook Rental
Solexel $11 million Solar Power
2U $10.5 million Online Education
Coursera $10 million Online Education
Avenues $10 million Online Education
Kno $10 million Online Textbooks

Along with the positions listed above, the company has several other smaller investments. Names like Twitter, Facebook, Dropbox, Chegg, and Coursera are pretty well-known companies. We also see big exposure to the push into online education, which could be one of the new waves of the future with the rising cost of college education and debt burden it is causing for young adults.

This kind of exposure puts the company in a better position than MVC Capital, which has exposure to companies like Security Holdings, an electric engineering firm; FOLIOfn, a technology information company; and Biogenic Reagents, a renewable energy company. GVC Capital has a more well-known portfolio that is much closer to IPO potential (this is the big payoff for venture capital firms).

GSV Capital raises money for new investment
GSV Capital recently raised $69 million through a convertible bond offering in order to make new investments in private technology companies. The company is paying slightly more than 5% for the debt, so considering the high returns venture capital looks for in their investments, this could be a significant value-creation opportunity. Investors should keep their eye out for news on new investments GSV Capital is currently making.

The exposure to Twitter (pre-IPO) and Facebook make GSV Capital worth investigating. But, the exposure to some of the other bigger name private companies could become the real value of an investment in this company. The company has done a great job picking investment candidates, and now has more capital to find new investments. Investors should check out GSV Capital now, before Twitter goes public, and we see the value of this stake go up.

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Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 01, 2013, at 12:12 AM, miaimi wrote:

    I am long GSVC and think there is room to go a lot higher on twitter, Cleft and others.

    One thing, GSVC sold half of its position in Facebook.

  • Report this Comment On October 01, 2013, at 7:31 AM, bike5389 wrote:

    Why when talking about investing in Twitter did you fail to explain the SVVC connection and potential ????

  • Report this Comment On October 01, 2013, at 7:43 AM, bike5389 wrote:

    From SVVC press release.

    Twitter, Inc. is an online social networking service that lets users send

    and receive 140-character messages ("tweets"). As of March 31, 2013, the

    Fund's investment in Twitter consisted of 194,000 shares of preferred

    stock and 812,200 shares of common stock and represented approximately

    9.2% of the Fund's gross assets.

  • Report this Comment On October 01, 2013, at 1:06 PM, IlluminatInvest wrote:

    The convertible bond offering is a terrible deal for current shareholders, who have to bear an additional $25M in interest and management fees over 5 years, which along with the $10.8M of the money raised that is set aside for the benefit of the bondholders, means GSVC is paying $95M for access to only $58M to actually invest.

    Even if they find another deal comparable to Twitter, by far their biggest and best deal, this offering will barely be beneficial to current shareholders when you also consider the dilution it will cause.

  • Report this Comment On January 25, 2014, at 7:09 PM, stockmanjones wrote:

    "I am long GSVC and think there is room to go a lot higher on twitter, Cleft and others.

    One thing, GSVC sold half of its position in Facebook."

    Ugg, if you are like me, you bought around that time and have just seen the stock languish, then lose, what, 15%-20%.

    One can only hope that with coverage this stock might go back up. Probably should have just sold it immediately, this stock has stunk for months...

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