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.

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.