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GSV Capital Corp Message Board

  • dartsdobetterthani dartsdobetterthani Sep 20, 2013 2:31 AM Flag

    Estimated present GSVC NAV

    Looking at the three public positions in GSVC: FB, CTRL & SSNI, we can see that they have increased a net $14.85 million ($0.77 of NAV) since June 30.

    Now lets factor in just the three portfolio companies that have filed S-1's and will likely be going public soon: Twitter, Violin Memory, and Chegg. If we take a reasonably conservative estimate for Twitter's valuation to be 50% more than GSVC valued it on 6/30 this would add about $0.97 to NAV. Setting Violin's value to $8/share (the low end of the $8 to $10/share valuation on its S-1) would add about $0.28 to NAV. Assuming that Chegg IPOs and trades at just the value that GSVC carries it on its books, the net contribution to NAV from these three companies is about $1.25.

    Now, allow about $0.10/share for fund expenses and we get a 6/30 NAV of $12.87 being adjusted by $1.92 to come up with a conservative estimated NAV of $14.85.

    Yes, I know that I did not factor in the rest of the portfolio. My assumption is that it continues to maintain the same valuation as it had on 6/30.

    So, given that a conservative present NAV estimate is $14.85, GSVC seems like a very solid buy up to this point with further upside in case the conservative estimates prove to be too low. So, I am pretty much a buyer below $15. Beyond $15 I want to see valuations for Twitter and Violin and Chegg move appreciably.

    Sentiment: Buy

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    • dartdobetterthanni, agreed, looking a little extended here.

      • 1 Reply to scienceinvestments101
      • scienceinvestments101: I have a confession. With the Palantir round going out at a $6 billion valuation (about a 50% increase in valuation over GSVC's 6/30 pricing) I have updated my NAV analysis to account for today's closing prices for FB, CTRL, SSNI and VMEM and I come up with $13.92 not counting Twitter or any of the other companies in the portfolio but including approximately $0.13 for quarterly fund expenses.

        I believe that Twitter will IPO at a valuation of about $15 billion and will trade in the $20 to $30 billion range, but with a small float it could easily exceed that. At a valuation of about $25 billion the NAV would be approximately $15.92.

        So ... I threw caution to the wind and did something that I may regret--I purchased a couple of November $12.50 call options for $3.30 each. This is clearly riding on the ragged edge of justifiable valuations and hoping that Chegg and other portfolio companies will add some upside. The reason for this speculative call is that I don't see a lot of downside other than the macro risk (though, this is a substantial risk) of our deeply polarized government defaulting or coming close to a default on our debt.

        I would not recommend anyone else follow this path--it could be a quick way to lose money. GSVC appears fairly valued at this time and only lottery players, gamblers, and yours truly are hoping for a little more.

        Sentiment: Buy

    • Darts - What would you buy (pre-IPO) if you were Twitter? Facebook had its Instagram - who is it that could froth
      up Twitter to north of $20-30B? Financing not a problem if the story in the Financial Times under Twitter dtd
      Sept. 22 is for real

      • 1 Reply to allanjudy
      • allanjudy--I really don't have a good idea of what is out there. Twitter starts off with a very dedicated user base and they should (and I believe they will) continue incremental expansion. The most logical way is through acquisitions of smaller companies. Hasn't Yahoo purchased nearly 20 companies since Marissa took the helm?

        Long ago there was a company called Amazon who seemed to have no true competitor--yes, eBay seemed like it might move into the same space but we all can see what happened there, and Walmart and, potentially, Costco and Target, seemed like they would compete, but, again, nothing came of that. Now when you look at Amazon you see competition all across the board--Netflix, Redbox, Apple, Google, Microsoft, etc. Amazon has brilliant management with phenomenal vision and execution (sounds a little like Apple, though, they are probably better on the execution and not quite as good on the vision as the Big A). They have basically, through acquisitions, parlayed their user base operations into something much larger.

        Twitter does not have the same scope of ecosystem as Google, Apple, Microsoft, or Facebook, but they have an opportunity to incrementally build. While they are making phenomenal strides on their monetization efforts, it would be a major mistake for them to rest on their laurels and just focus on the bottom line. However, since management seems to have its head on straight I think they will use a substantial portion of the IPO proceeds to acquire smaller companies that fill in the puzzle pieces that will enable them to encroach more on the aforementioned bigger names.

        Sentiment: Buy

    • Hey Darts -please give us your take on the Seeking Alpha post today on GSVC

      • 1 Reply to allanjudy
      • I actually like Seeking Alpha's analysis in that they do go into specific numbers. GSVC does periodically disclose its portfolio and rather than issue specious bull or bear aphorisms it is nice to see someone actually base a statement on something concrete.

        However, Seeking Alpha makes one little mistake. It assumes that the 85% of GSVC's portfolio that is not Twitter are just stagnant assets. Unfortunately, we know that to not be the case.

        The public companies in the portfolio, FB, CTRL, & SSNI have a well-defined price change from 6/30. FB (closing price $48.45) adds $0.43, CTRL (closing price $19.14) adds $0.39 to NAV and SSNI (closing price $16.24) subtracts $0.04. So these three public positions alone move the 6/30 NAV from $12.87 to $13.65.

        For the private companies there are two that have filed to go public (Chegg and Violin Memory) and Violin Memory is going public this week. Now, while I have my doubts about VMEM, I admit that I could be entirely too cautious and that it very well may go up to $12 which would add about $0.74 to NAV.

        Among the other companies, GSVC has some really exciting names--Palantir, Dropbox and Coursera come to mind.

    • You did a good job on your valuation. The only thing that will play is depending on the market . These start up funds usually will range between a -10 to a +10 percent to book value. With all the market turbulence is why the price is where its at presently. The twitter ipo as we get closer will help get past the present pricing. Your assumption on buying below book value is a sound one.

    • I like the math. Did you take into consideration the convertible shares on an if issued basis. I thinks important. The dilution will cause NAV to be a bit less is my guess.

      • 2 Replies to octaveus26
      • Octaveus26, the dilution will only take effect if the trading price goes above the conversion price of $16.26. In that case, any shares that were purchased for less than $15 are doing okay. Considering the $69 million against the $248 million (as of June 30), the dilution is about 22% of the existing positions--e.g., Twitter's 15% would go down to about 12%. Remember though, the influx of the $69 million can now be invested in other private companies. So far, even with the losers--Groupon, Zynga & Silver Spring Networks, I like how Mr. Moe is investing.

        We will get another nice datapoint this week when Violin Memory IPOs. The non-binding range in its S-1 filing is $8 to $10 per share. From a 20,000-foot perspective, if it settles in above $6 per share (the 6/30 carrying price on GSVC's books) that would be great! However, given FIOs struggles, Violin Memory could turn out to be a loser.

        Sentiment: Buy

      • Yup, just be aware that they'll have to record the change in fair value of the preferred stock against net income every quarter, so now that they'll finally have some positive income from the upcoming IPOs it will be offset by this convertible deal.

        Sentiment: Sell

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