Investors Are Missing the Big Opportunity with GSV Capital Corp.

Considering GSV Capital has proven the ability to prosper from the pre-IPO market with the smashing success of Twitter, the stock shouldn't trade with a substantial discount, or even a discount at all.

Mar 21, 2014 at 7:00AM

After reporting that net asset value, or NAV, jumped to nearly $15, why would the stock of GSV Capital Corp. (NASDAQ:GSVC) plunge nearly 10% to below $12?

GSV Capital is a business development corporation that invests in pre-IPO, venture-backed firms. The company has a portfolio of nearly 50 investments with a focus on social media, education tech, and big data. The investment firm competes in the industry against Firsthand Technology Value Fund (NASDAQ:SVVC) and other venture firms for the investment positions and investor dollars. The goal of the two funds is to provide regular investors the opportunity to participate in the pre-IPO markets.

While the ability to participate in the Twitter (NYSE:TWTR) IPO should've been a gold mine to investors, the actual results of the two stocks have been disappointing with the them consistently trading below reported NAV. Another disappoint is the significant gaps in reporting the current NAV and the difficulties with valuing private firms that adds confusion to the market. Only recently, GSV Capital reported the NAV for the time period ending Dec. 31.

Twitter valuation example
At the end of 2013, Twitter accounted for nearly 36% of the investment fund with a valuation of $102.8 million. Unfortunately, GSV Capital has a six-month lock up period preventing the company from selling the stock for another month. With Twitter dropping during the first quarter, it appears investors are overly concerned about the end of March NAV. 

Due to the inability of selling the position for another fourth months at the end of the year, the company was forced to record the Twitter valuation at a roughly 20% discount to market price. The GSV Capital position is listed at $53.68, making the listed price nearly equivalent to the current price. The NAV of $14.91 is already reflecting the Twitter decline.

Ironically, Firsthand Technology Value Fund has Twitter as the largest position with it representing 19.1% of the estimate net assets on Feb. 28.

Updated valuations  
The other big issue with the NAV that tends to catch GSV Capital investors off guard is the persistent high-profile valuation gains that don't make the quarter-end updates. In this case, GSV Capital reported quarterly numbers on March 13, more than 70 days after the end of the quarter. Several of the private positions, including most predominantly Palantir Technologies and Dropbox, have seen fundings at valuations significantly above that of the listed prices at the end of December. For example, Dropbox reportedly completed a funding valuing the private online-storage leader with a $10 billion valuation, or roughly double that of the listed value on the books of GSV Capital.

Another prime example occurred with the third quarter report after the Twitter IPO back in November. While it was clear that the social-media leader had a smashing IPO only days before the release of earnings that dramatically bumped up the value of GSV Capital's investment, the fund was left recording the position with limited gains based on pre-IPO values.

As mentioned above, Firsthand Technology provides more frequent updates, including one with investment data from Feb. 28. Outside of Twitter, the fund is still heavily invested in Facebook and cash. Oddly, the combination leaves the fund less than 50% invested in private firms. The fund trades at a similar discount to NAV as GSV Capital.

Bottom line
After a year of strong gains led by the Twitter IPO, the market is a tad perplexing, leaving so much value on the table with both GSV Capital and Firsthand Technology Value Fund. Sure, each fund has quirks, but in both cases the investor can obtain a piece of Twitter or a hot private firm like Dropbox at a roughly 20% discount or more. It sure beats buying the firms directing on a private exchange or even in the public markets without the discount.

For now, GSV Capital provides the most intriguing list of private firms for investors wanting the original intent of these investment funds. Firsthand Technology Value Fund offers the opportunity to buy Twitter and Facebook at a substantial discount with the understanding that it could dump the stocks any day now with the Twitter lock-up about to release the shares. Either way, the discount is difficult to pass up.

Finding the bank that's backing the tech gold mine
Do you hate your bank? If you're like most Americans, chances are good that you answered yes to that question. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

Mark Holder and Stone Fox Capital clients own shares of GSV Capital. The Motley Fool recommends Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers