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).
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.
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:
|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.
Shaun Currie has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. 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.