GSV Capital: Access to Private Equity
09/28/2017 5:00 am EST
GSV Capital (GSVC) is a publicly traded Business Development Corporation (BDC) that functions as a public venture capital fund, making equity investments into promising growth companies, notes growth stock expert Ian Wyatt, editor of Million Dollar Portfolio.
The August quarterly report gives us new insights into the most recent valuation of companies in the portfolio. Below is a table that shows the company's top 10 investments.
As of June 30, GSV had investments in 38 portfolio companies with a "fair value" of $282.8 million. The company's net asset value (NAV) - after subtracting debt - was $202.1 million.
On a per-share basis, NAV was at $9.11. That was an improvement from $8.83 per share as of March 31. GSV shares continue to trade at a deep discount to the NAV. Lately, the shares were trading at $5.36.
Right now, there is a large disconnect between the value of the company's assets and the share price. If GSV shares were to trade at the NAV, the stock could rise 70%.
GSV management believes the shares are undervalued. In a press release, founder and Chairman Michael Moe commented:
We are optimistic that a more robust IPO market and continued M&A activity will be a positive catalyst for our portfolio, but we remain determined to take proactive steps to maximize shareholder value.
To this end, we are assertively monetizing positions as opportunities arise, and our Board of Directors approved a $5.0 million discretionary share repurchase program."
The market reacted positively to the news release and sent shares higher. Share repurchases can be effective, especially when a company's stock is trading at a deep discount to the fair value.
This is clearly a situation where GSV shares do not reflect the value of the investments in the portfolio. With shares trading at a 41% discount to the NAV, a share repurchase makes a lot of sense.
I remain bullish on Silicon Valley's private tech companies, including Spotify, Palantir and Dropbox (all top holdings in the portfolio).
Shares of GSV are attractive at this level. Investors looking to add exposure to private tech deals should take a closer look at GSV Capital.