Special Alert – Adding to our position in GSV Capital shares
Key points inside this Alert:
- Following the thesis confirming June quarter results, we are adding to our position in GSV Capital (GSVC) on the Tematica Investing Select List given the steep discount to the company’s net asset value per share.
After last night’s close GSV Capital (GSVC) reported June quarter results — while the financial media headlines reported a mixed quarter in terms of revenue and the bottom line — our view is the quarter was a solid one characterized by the continued increase in its net asset value per share. That continued climb, as well as the reasons behind it, make us increasingly comfortable with our $11 price target. Given the sharp discount in between the current share price and GSV’s net asset value per share, we are adding to our position at current levels, which will enhance our cost basis as well.
Now onto the report …
Exiting June, GSV’s net asset valued totaled $217.1 million, up from $212.5 million exiting March driven primarily by the portfolio’s top five holdings. As a reminder, those holdings include Spotify (SPOT), Palantir Technologies, Dropbox (DBX), Coursera, and Stormwind. In total, the portfolio value for those five positions rose to $134.3 million (roughly 62% of the portfolio) from $124.2 million (58.5%). This means the holdings in its other 23 positions, in aggregate, fell sequentially. In our view this reaffirms management’s strategic pivot to concentrate its investments around its larger positions is paying off, which is also evidenced by the year over year decline in portfolio positions to 28 from 38 a year ago.
As I suspected, GSV put its share buyback program to work during the quarter, repurchasing 315,625 shares of common stock for approximately $2.2 million in cash. That brings it total share repurchase through the end of the June quarter to 1.43 million shares for roughly $8.3 million. The combination of its higher net asset value and a lower share count both year over and sequentially were the key drivers behind the continued step up in GSV’s net asset value per share to $10.46 per share at the end of June vs. $9.64 per share exiting 2017 and $9.11 per share exiting the June 2017 quarter.
In the current quarter, GSV has already purchased another 230,623 shares for $1.6 million, and with $5 million remaining under its current authorization I suspect the company will remain an active buyer given the discount to its net asset value per share.
In terms of potential new investments or scaling into existing ones, at the end of June GSV’s balance sheet held $93.5 million in cash and $65.1 million of marketable securities, of which $25.5 million is subject to sales restrictions. Factoring in the share repurchase activity over the last few weeks, GSV has roughly 20.5 million shares outstanding, $6.40 in available cash per share on its books and its net asset value per share is about $10.58 per share.
This cash position leaves ample firepower for GSV to add positions within its preferred bite size — $10 million average position size up to $15 million for an outsized one in a premium, late-stage growth company that a line of sight liquidity event, be it an initial public offering or getting acquired. With CB Insights having identified some 355 IPO candidates, the waters are full, but we expect GSV to remain disciplined and stick to its core investment areas – Education Technology, Cloud Computing, Big Data, and Social Mobile, Marketplaces, and Sustainability.
The takeaway from all the math-Olympics is GSV has ample dry powder to put to work and its share repurchases have and will continue to help move its net asset value per share higher. It’s also not lost that net asset value per share is approaching our $11 price target, while the shares are trading at a steep discount relative to their net asset value per share. With the current share price below our existing $7.50 cost basis, we are pulling the trigger and adding to our GSVC position at current levels.
- Following the thesis confirming June quarter results, we are adding to our position in GSV Capital (GSVC) on the Tematica Investing Select List given the steep discount to the company’s net asset value per share.
