GSV CAPITAL CORP GSVC
February 04, 2013 - 12:48pm EST by
ladera838
2013 2014
Price: 8.65 EPS $0.00 $0.00
Shares Out. (in M): 19 P/E 0.0x 0.0x
Market Cap (in $M): 167 P/FCF 0.0x 0.0x
Net Debt (in $M): -42 EBIT 0 0
TEV ($): 125 TEV/EBIT 0.0x 0.0x

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  • Closed-end Fund
  • BDC
  • Discount to NAV

Description

Company

GSV Capital Corp. (GSVC) is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a business development company. GSVC’s investment objective is to maximize its portfolio’s total return, principally by seeking capital gains on its equity and equity-related investments. The company invests principally in the equity securities of rapidly growing venture capital-backed emerging companies, acquiring its investments through secondary marketplaces for private companies, negotiations with selling stockholders and direct investments with prospective portfolio companies. GSVC may also invest on an opportunistic basis in select publicly-traded equity securities or certain non-U.S. companies that otherwise meet its investment criteria.

 

The company’s investment philosophy is premised on a disciplined approach of identifying high-growth emerging companies across several key industry themes which may include, among others, social media, mobility, cloud computing, software-as-a-service, green technology and education technology. The investment adviser’s investment decisions are based on a disciplined analysis of available information regarding each potential portfolio company’s business operations, focusing on the company’s growth potential, the quality of recurring revenues and cash flow and cost structures, as well as an understanding of key market fundamentals. Top tier venture capital funds or other financial or strategic sponsors have invested in many of the companies that the company evaluates.

 

GSVC seeks to deploy capital primarily in the form of non-controlling equity and equity-related investments, including common stock, warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity, and convertible debt securities with a significant equity component.

 

Value

Private technology company investing is periodically in and out of favor, with the stock price trading accordingly at large premiums and discounts to NAV. 

 

In early 2012 (prior to the Facebook IPO), GSVC traded at a greater than 30% premium to its most recent NAV.  The NAV per share as of 9/30/12 was $13.35, with the stock currently trading at a 35% discount to NAV (54% upside to NAV).

 

   

Shares /

   

% of

 

Headquarters /

Capital

   

Net

Portfolio Investments*

Industry

Contribution

Cost

Fair Value

Assets

           

2tor, Inc.

 Landover, MD

       

Common shares

 Online Education

1,151,802

$8,757,599

$8,730,846

3.36%

Preferred shares, Series A

 

167,431

1,273,125

1,269,154

0.49%

Total

   

10,030,724

10,000,000

3.85%

           

AltEgo, LLC

 Santa Monica, CA

       

Preferred shares, Series B-2

 Social Media Customer Acquisition

1,400,000

1,420,406

1,400,000

0.54%

 

Platform

       
           

AlwaysOn, Inc. (1)(2)

 Woodside, CA

       

Preferred shares, Series A

 Social Media

1,066,626

1,027,391

1,087,955

0.42%

           

Avenues World Holdings LLC

 New York, NY

       

Preferred shares, Class A-1

 Globally-focused Private School

5,000,000

10,026,573

10,000,000

3.85%

           

Bloom Energy Corporation

 Sunnyvale, CA

       

Common shares

 Fuel Cell Energy

201,589

3,855,601

3,678,999

1.42%

           

Chegg, Inc.

 Santa Clara, CA

       

Common shares

 Textbook Rental

1,274,193

10,012,543

10,193,544

3.92%

Preferred shares, Series F

 

500,000

4,008,654

4,000,000

1.54%

Total

   

14,021,197

14,193,544

5.46%

           

Control4 Corporation

 Salt Lake City, UT

       

Common shares

 Home Automation

3,650,667

6,274,551

5,950,587

2.29%

           

CUX, Inc. (2)

 San Francisco, CA

       

Preferred shares, Series C

 Corporate Education

246,305

2,006,077

2,000,000

0.77%

           

Dailybreak, Inc. (2)

 Boston, MA

       

Preferred shares, Series A-1

 Social Advertising

1,545,181

2,000,000

2,000,000

0.77%

           

Dataminr, Inc.

 New York, NY

       

Preferred shares, Series B

 Social Media Analytics

904,977

2,060,602

1,999,999

0.77%

           

DreamBox Learning, Inc.

 Bellevue, WA

       

Preferred shares, Series A

 Education Technology

3,579,610

758,017

750,000

0.29%

           

Dropbox, Inc.

 San Francisco, CA

       

Common share

 Online

760,000

8,640,940

8,360,000

3.22%

Preferred shares, Series A-1

 Storage

552,486

5,015,333

6,077,346

2.34%

Total

   

13,656,273

14,437,346

5.56%

           

Facebook, Inc. (3)

 Menlo Park, CA

       

Common shares, Class B

 Social Networking

350,000

10,472,294

6,898,710

2.65%

           

Fullbridge, Inc. (2)

 Cambridge, MA

       

Preferred shares, Series C

 Business Education

1,196,809

2,250,001

2,250,000

0.87%

           

Gilt Groupe, Inc.

 New York, NY

       

Common shares

 e-Commerce

248,600

6,594,346

5,469,200

2.10%

 

Flash Sales

       
           

Global Education Learning (Holdings) Ltd. (2)

 Hong Kong

       

Preferred shares, Series A

 Education Technology

1,472,175

2,999,998

2,999,998

1.15%

           

Grockit, Inc. (2)

 San Francisco, CA

       

Preferred shares, Series D

 Online Test

2,728,252

2,005,945

2,000,000

0.77%

 

Preparation

       
           

Groupon, Inc. (4)

 Chicago, IL

       

Common shares

 Online Deals

80,000

2,128,774

381,600

0.15%

           

Kno, Inc.

 Santa Clara, CA

       

Preferred shares, Series C

 Digital

440,313

2,262,006

2,250,000

0.87%

Preferred shares, Series C-1

 Textbooks

1

7,510,334

7,500,000

2.89%

Common shares

 

50,000

214,681

205,000

0.08%

Total

   

9,987,021

9,955,000

3.84%

           

Maven Research, Inc. (2)

 San Francisco, CA

       

Preferred shares, Series B

 Knowledge

49,505

217,206

200,000

0.08%

Preferred shares, Series C

 Networks

318,979

1,999,998

1,999,998

0.77%

Total

   

2,217,204

2,199,998

0.85%

           

NestGSV, Inc. (2)

 Redwood City, CA

       

Preferred shares, Series A

 Incubator

1,000,000

1,021,778

1,000,000

0.38%

           

NestGSV Silicon Valley, LLC (2)

 Redwood City, CA

       

Common membership interest

 Incubator

$500,000

500,000

500,000

0.19%

           

Neuron Fuel, Inc.

 San Jose, CA

       

Preferred shares, Series AAI

 Computer Software

250,000

262,530

250,000

0.10%

           

NewZoom, Inc. (d/b/a ZoomSystems)

 San Francisco, CA

       

Preferred shares, Series A

 Smart e-tail

1,250,000

260,476

250,000

0.10%

 

(Retail)

       
           

Palantir Technologies, Inc.

 Palo Alto, CA

       

Common shares, Class A

 Cyber Security

7,045,690

19,780,613

19,747,501

7.60%

Preferred shares, Series G

 

326,797

1,008,968

999,999

0.38%

Total

   

20,789,581

20,747,500

7.98%

           

Serious Energy, Inc.

 Sunnyvale, CA

       

Common shares

 Green Materials

178,095

739,130

 --

0.00%

           

SharesPost, Inc.

 San Bruno, CA

       

Preferred shares, Series B

 Online

1,771,653

2,257,984

2,256,752

0.87%

Common warrants, $0.13 strike price, expire 6/15/2018

 Marketplace

770,934

23,128

8,480

0.00%

Total

 (Finance)

 

2,281,112

2,265,232

0.87%

           

Silver Spring Networks, Inc.

 Redwood City, CA

       

Common shares

 Smart Grid

510,143

5,145,271

3,275,118

1.26%

           

SinoLending Ltd. (2)

 Shanghai, China

       

Preferred shares, Class A

 Chinese P2P Lending

6,414,368

501,998

500,000

0.19%

           

Solexel, Inc.

 Milpitas, CA

       

Preferred shares, Series C

 Solar Power

4,576,659

10,016,559

10,000,000

3.85%

           

Spotify Technology S.A.

 Stockholm, Sweden

       

Common shares

 Music Streaming Service

3,658

3,598,472

3,589,659

1.38%

           

StormWind, LLC (2)

 Scottsdale, AZ

       

Preferred shares, Series B

 Interactive Learning Platform

3,279,629

2,019,687

2,000,000

0.77%

           

Strategic Sports Solutions, LLC (2)

 New York, NY

       

Preferred shares, Class A1

 Sports Analytics

500,000

529,522

500,000

0.19%

           

SugarCRM, Inc.

 Cupertino, CA

       

Common shares

 Customer Relationship Manager

432,500

1,521,100

1,513,750

0.58%

           

The Echo System Corp. (1)(2)

 New York, NY

       

Preferred shares, Series A

 Social Analytics

512,365

1,436,404

1,639,568

0.63%

Preferred warrants, $0.20 strike price, expire 11/14/2016

 

68,359

75,988

70,394

0.03%

Total

   

1,512,392

1,709,962

0.66%

           

The rSmart Group, Inc.

 Scottsdale, AZ

       

Preferred shares, Series B

 Higher Education

1,201,923

1,266,940

1,250,000

0.48%

 

Learning Platform

       
           

Top Hat 430, Inc. (2)

 Shakopee, MN

       

Preferred shares, Series A

 Jewelry Retailing Technology

1,777,778

4,015,179

4,000,001

1.54%

           

Totus Solutions, Inc. (2)

 Carrollton, TX

       

Common shares

 LED Lighting

20,000,000

5,023,748

5,000,000

1.92%

           

TrueCar, Inc.

 Santa Monica, CA

       

Common shares

 Online

377,358

2,014,863

2,011,318

0.77%

 

Marketplace (Cars)

       
           

Twitter, Inc.

 San Francisco, CA

       

Common shares

 Social

1,835,600

31,755,821

34,876,400

13.42%

Preferred shares, Series A

 Communication

65,000

1,235,290

1,235,000

0.47%

Total

   

32,991,111

36,111,400

13.89%

           

Violin Memory, Inc.

 Mountain View, CA

       

Preferred shares, Series B

 Flash

800,000

4,800,798

4,800,000

1.85%

Preferred shares, Series D

 Memory

1,666,666

10,018,045

9,999,996

3.85%

Total

   

14,818,843

14,799,996

5.70%

           

Whittle Schools, LLC (2)

 New York, NY

       

Preferred shares, Series B

 Education Technology

1,500,000

1,500,000

1,500,000

0.58%

           

ZocDoc Inc.

 New York, NY

       

Preferred shares, Series A

 Online Medical

200,000

3,563,178

3,500,000

1.35%

 

Scheduling

       
           

Zynga, Inc.

 San Francisco, CA

       

Common shares

 Social Gaming

533,333

3,003,462

1,514,666

0.58%

   

 

 

 

 

Total Portfolio Investments

   

 224,689,927

 217,441,538

 
           

Cash and money markets

     

 42,331,482

 
           

Total

     

 259,773,020

 
           

Less: Total Liabilities

     

 (449,771)

 
           

Net Asset Value

     

 259,323,249

 
           

NAV per share

     

$13.42

 

# shares

     

 19,320,100

 
           

 

In terms of an update, the values today of the publicly traded companies owned by GSVC (Facebook, Groupon and Zynga) in total exceed the 9/30/12 carrying value on GSVC’s books by $0.16 per GSVC share.

 

Additionally, Palantir Technologies trades currently on private markets at approximately $3.25 per share, implying a market value in excess of 9/30/12 carrying value of $0.16 per GSVC share.

 

Management Fees

GSVC pays GSV Asset Management a fee for its services under an Investment Advisory Agreement consisting of two components — a base management fee (2% of assets annually) and an incentive fee of a 20% carry with an 8% annual hurdle.  Given that NAV is currently below purchase cost, if an incentive fee does come into play in the future, that will be a good problem to have (since the implied appreciation would be quite attractive).  While significant, the annual management fee covers most of the management cost (personnel, etc are employees of GSV Asset Management) and the gradual erosion of capital from the annual management fee pales in comparison to the current discount.

 

Taxes

As a Registered Investment Company, GSVC generally will not have to pay corporate-level federal income taxes on any income that it distributes to its stockholders as dividends.

GSVC will be subject to a 4% nondeductible federal excise tax on certain undistributed income unless it distributes in a timely manner an amount at least equal to the sum of (1) 98% of net ordinary income for each calendar year, (2) 98.2% of capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years. GSVC generally will endeavor in each year to make sufficient distributions to its stockholders to avoid any U.S. federal excise tax on its earnings.

 

I do not hold a position of employment, directorship, or consultancy with the issuer.
Neither I nor others I advise hold a material investment in the issuer's securities.

Catalyst

Catalyst

Investing in private technology companies comes back into favor, and/or some of the private companies in the portfolio go public, raising the NAV and profile of GSVC.

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