​GSV Capital a Great Risk-Reward Opportunity With Improving IPO Market

Spotlight Companies |

Image via Tech.Co/Flickr CC

After two years of sluggishness, the IPO market is heating up again in 2017. Led by the $3.4-billion IPO of Snap, Inc. (SNAP) Trade, 25 initial public offerings raised $9.9 billion during the first quarter. Halfway through the second quarter, 31 more IPOs, raising $6.5 billion have already transpired. That means only $2.4 billion more in IPOs are needed to exceed the amount of IPO-capital raised for all of 2016.

This is good news for investment fund GSV Capital Corp. (GSVC) Trade, whose top three holdings are venture-backed tech unicorns that could be heading to the public domain. In a recent shareholder call discussing the results of Q1 2017, GSV CEO Michael Moe noted the buildup due to IPO proceeds from venture-backed companies dwindling 90% from 2014 to 2016. “[With] the performance of the NASDAQ and the receptivity of new IPOs, we expect that this backlog is going to be starting to work through, which should be very beneficial for GSV Capital shareholders,” Moe said on the call.

GSV’s top three holdings are Palantir, Spotify and Dropbox, accounting for about 28% of GSV’s total portfolio fair value. As the name implies (GSV is an acronym for “Global Silicon Valley”), the company’s portfolio is dominated by leading technology companies, including positions in the aforementioned companies, as well as other disruptors like Lyft, Snap, General Assembly and Chegg (CHGG) Trade, a company trading near its all-time high.


Big data analytics and security company Palantir is famously quiet and may not be the household name like Spotify, Dropbox or Snap, but it has earned the business of majors worldwide and strong interest from investors, raising $1.9 billion to date at a valuation of $20 billion. Clients include healthcare giant Merck (MRK), aerospace leader Airbus, BP Amoco (BP), GlaxoSmithKline (GSK), Credit Suisse (CS) and Deutsche Bank (DB), to mention just a few. At a fair value of $39.1 million, Palantir represents 14.4% of GSV’s portfolio.


Spotify’s position in the music streaming industry was succinctly summed up by Moe, saying, “the company isn't just holding its own against Apple (AAPL). It's actually building a wider lead.” More precisely, Spotify said in March that it has over 50 million paying subscribers, more than doubling the 20 million that Apple has with its music service. Moreover, Spotify’s recent release of Spotify Codes is expected to “open up new marketing revenue opportunities as brands will be able to share Spotify Codes on social media as a new way to engage their followers,” according to GSV.

Spotify has expressed interest to IPO in the past, reportedly seeking a valuation between $11 billion to $13 billion. The Wall Street Journal reported last month that Spotify may opt for a direct offering in lieu of a traditional IPO, a move that GSV is monitoring to decide how to best monetize its investment ($19.6 million fair value, 7.2% of GSV portfolio). If Spotify goes the direct route, that could be beneficial to GSV, as lock-up periods typically aren’t part of the process.


Dropbox has had the attention of Wall Street for years now since it burst on the scene as a leading cloud-based file sharing and storage company. Touting over 500 million users, 200,000 corporate users and its position as the first software as a service company to reach a $1 billion revenue run rate, Dropbox is the industry’s elephant in the room. Analysts speculate that an IPO is coming and Moe believes it could come as early as this year.


Lyft is a company to keep an eye as it gains on ride-hailing leader Uber. Lyft has strong investor support to catch its higher valued peer, raising $500 million in April at a $7.5 billion valuation. Some bad press has hurt Uber at a time when Lyft is gaining momentum, as well. This is qualified by Moe, who noted that by the fact the “number of US consumers who said they would consider taking Lyft jumped to 9.6% in the first quarter, up from 5.6% in the fourth quarter. Uber in contrast fell to 14% from 18% in the same period.”

Snap’s Lockup Expiration

The company also made sure to note that it is up by about 50% on its investment in Snapchat-owner Snap, Inc. and that those shares become freely tradable on July 31, 2017.

Speaking to net asset value (NAV) in the call, GSV CFO Bill Tanona explained the company ended Q1 with a NAV per share of $8.83, up $0.17 per share from $8.66 per share at the end of 2016. As for liquid assets, GSV ended the first quarter with $17.2 million, consisting of about $1.4 million in cash, $10.0 million in free trading public stock and $5.9 million in stock subject to a lock-up agreement, including SNAP.

"We launched GSV Capital to create broader access to the most dynamic venture-backed private companies in the world and we are pleased to report continued strong fundamentals in our portfolio," Moe stated in the news release on the recent quarter. Despite the robust portfolio and dramatically improving IPO market, GSV Capital is trading at approximately 50% of net asset value (~$200 million NAV vs. ~$100 million market cap), a fact that Moe believes continues to position his company as a “great risk-reward opportunity for investors based on the strong momentum [to the IPO space].”

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Symbol Name Price Change % Volume
AAPL Apple Inc. 177.84 -0.40 -0.22 20,763,501 Trade
CHGG Chegg Inc. 23.10 0.53 2.35 2,203,453 Trade
GSVC GSV Capital Corp 7.18 -0.17 -2.31 384,589 Trade
SNAP Snap Inc. Class A 14.65 -0.23 -1.55 9,877,781 Trade


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