GSV Capital's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar.14.14 | About: GSV Capital (GSVC)

Start Time: 16:15

End Time: 16:53

GSV Capital Corp. (NASDAQ:GSVC)

Q4 2013 Earnings Conference Call

March 13, 2014, 16:15 PM ET

Executives

Michael T. Moe - Chairman, CEO and Chief Investment Officer

Stephen D. Bard - CFO

Tricia Ross - IR, Financial Profiles, Inc.

Analysts

Jeff Houston - Barrington Research

Christopher Nolan - MLV & Company

Edward Woo - Ascendiant Capital

Jon Hickman - Ladenburg Thalmann

Operator

Good day, ladies and gentlemen and thank you for standing by. Welcome to GSV Capital's Fourth Quarter and Fiscal Year 2013 Earnings Conference Call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Thursday, March 13, 2014.

I would now like to turn the conference over to Tricia Ross of Financial Profiles. Please go ahead.

Tricia Ross

Thank you for joining us on today's call. I'm joined today by Michael Moe, GSV's Founder and CEO; and Steve Bard, the company's Chief Financial Officer. Please note that a slide presentation that corresponds to today's prepared remarks by management is available on the company's website at www.gsvcap.com under Investors, Events & Presentations. We are also live tweeting segments of this earnings call via the Twitter Handle at gsvcap.

Today's call is being recorded and webcast on www.gsvcap.com. Replay information is included in our press release that was issued today. This call is the property of GSV Capital Corp. and the unauthorized rebroadcast of this call in any form is strictly prohibited.

I'd also like to call your attention to customary disclosure in our press release today regarding forward-looking information. Statements made in today's conference call and webcast may constitute forward-looking statements which relate to future events or future performance or financial condition. These statements are not guarantees of our future performance, condition or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward-looking statements as a result of a number of factors including those described from time to time in the company's filings with the SEC. Management does not undertake to update such forward-looking statements unless required to do so by law. To obtain copies of GSV Capital's latest SEC filings, please visit the website at gsvcap.com.

Now, I'd like to turn the call over to Michael Moe. Michael?

Michael T. Moe

Thanks, Tricia and good afternoon. I'm going to begin today with a review of our portfolio as of December 31, 2013 and recent key developments. Then Steve Bard will provide a brief financial overview and we'll take your questions.

So, let's start on Slide 3. Net assets totaled 288 million or $14.91 per share on December 31. This is up $1.75 per share from our NAV of 254 million or $13.16 per share at the end of September. This was the third consecutive quarter of increased NAV driven largely by the appreciation of the assets amongst our top 10 holdings.

Our top 10 investments represented 80.9% of net asset value up from 64.4% in September 30 and the top 3 investments; Twitter, Palantir Technologies and Dropbox represented 53%, just over half of our net asset value up from one-third at September 30. So following Twitter's IPO on the New York Stock Exchange in November priced at $26, shares were obviously – I know everybody is familiar with this – was traded as high as 35 and it's currently showing at $53.55 and needless to say Twitter transaction we're very pleased with.

I think importantly though what I'd like to highlight is sort of how that investment took place because I think it's represented at and we certainly (indiscernible) the outcome that Twitter has been for us, but really how it did I think is illustrated of how we build our position. So we started with having Twitter as our priority holding that we wanted to acquire shares. We had to approve that Twitter could be able to buy shares but ultimately we're successful with that.

We started our initial investment with a relatively small transaction, $3 million, which we subsequently had 17 distinct transactions that ultimately resulted with us putting a little over $30 million and the price was just over $0.17 or kind of weighted costs. And I think again what we look to do is acquire shares in the leading companies and has thesis has confirmed and we're able to obtain shares at prices that we think are attractive, we'll continue to build those positions. So you can see sort of the outsize representation of our top names and really that's our playbook going forward.

As it relates to Twitter, we do believe and I think our commitment with 1.9 million shares of stock shows us that we believe it's a truly transformative business that is changing the way that we consume, interact, mobile, media, basically every trend that's going on and we think Twitter participates in many of these challenges on the forefront of.

If we turn to Slide 4 and kind of the backlog of the equities capital markets and the IPO market, we continue to be very bullish on equities overall and in particular for leading growth companies. Our reasons for enthusiasm includes one, the persistent demand imbalance for equities. Just a couple of data points to highlight this demand imbalance.

Over the past 15 years there has been a 60% reduction on the number of publicly traded companies in the public markets. And we've had $3.5 trillion of corporate buybacks during that period of time. And the second point is as we've illustrated before, the significant reduction in number of IPO or supply and you'll start to see cash flows into equity mutual funds increase as well.

The other day the stock market like all markets is a function of supply and demand had the very bullish fundamental that we see. Secondly, we continue to believe that valuations remain attractive and certainly on a relative basis, PE basis it were approximately 15 times and more importantly on a price because the free cash flow, markets looked [unabated] (ph) from a historical perspective.

And then compared to bonds, using the earnings yield method equities look approximately 60% undervalued, the bottom of course has been a case for sometime but nonetheless we don't see any reason why we're not going to be in the short-term, in the mid-term be in a good constructive environment for growth equities. And the third point is there remains very strong fundamentals for leading companies that we focus on.

We'll make this point later but if you look at our overall portfolio, revenue growth in 2013 and 2013 was 85%. So when we look at the IPO market, obviously 2013 was the best year in terms of issues and performance since the year 2000. We have 42 IPOs to date which is we think kind of consistent with what we saw last year.

Of the issues with price, 14% above the range; 57% within the range and 29% below. The average first day pop is in 17%. When you look at technology issues and we've only had a handful so far this year, we were actually pricing and performing much better than the overall average as a generality. So we have a healthy IPO market for the foreseeable future that leads us to believe that we will have several of our companies at least we're likely to pursue IPOs within 2014. We expect to be on the road, see investors in March and a number of other portfolio companies are certainly evaluating the public market waters.

Please turn to Slide 5 for forecast on the newest companies we added to our portfolio during the fourth quarter. The first company I'm going to talk about is Curious. Curious is an online money marketplace with its Curious.com as the Web site providing a short format video-based interactive lessons that help anyone learn about anything on their own time; everything from how to pick a great bottle of wine to how to make a blanket and everything else you could imagine.

The company has enjoyed incredible momentum since it was launched. We see this as a true business with a true network effects type of business with significant potential in our 4P formula; first P people with a tremendous management team and adjusting tips with the CEO who was formerly with Homestead which was sold to Intuit but we're very impressed by their team. And additionally consistent with investments we made, we look for a strong syndicate of investors. Redpoint was the earlier investor in Curious and so I'm delighted to join them as an investor in this company.

The second company that we – we actually have a small, some $1 million investment in this company. We had a more material position in the fourth quarter with Ozy Media. And what Ozy is doing is has an online new media business that's focused on what they call Change Generation, what's new and what's next. And so what you see in the Ozy's Web site is not about what you read about in the New York Times but in what you're going to read in the New York Times a year from now, not about Cheryl Sandler but the next Cheryl Sandler. Already the company has been existing six months. They've had Bill Clinton, Tony Blair, George Bush as guest editors for their piece and this is also a business that has involved Laurene Jobs as a publisher (indiscernible) investor of the company as well. In addition to Laurene we have Ron Conway, David Jones from Google as investors. And again we see great momentum for Ozy Media.

The third company that we invested in the fourth quarter is a software company JAMF Holdings which develops and sells IT management software for enterprises with large Apple product deployments; iPhones, iPads, MacBooks, et cetera. JAMF's Casper product suite allows IT administrators to deploy provision to distribute applications, configure in remotely controlled devices, update software across devices, enhance security and allow for disk encryption as Apple products continue to proliferate, become more prominent in the enterprise JAMF is extraordinary well positioned to be the go-to-platform for IT administrators out there in this space. What we found in our due diligence is the reputation that JAMF has amongst its customers is extraordinary and this is evidenced by the fact that they got over 95% reoccurring revenue base. We made this investment along with Summit Partners and again we were delighted to have the opportunity to participate with JAMF.

The fourth company I'll mention is ePals. ePals has created a next generation of technology-enabled education media and also a global community that has over 10 million members, teachers, parents, students and over 200 countries connecting them focused on learning. When we look at ePals we also are a next generation media business and have amongst its properties brands that you've probably heard of Cricket and Cobblestone which are award winning and extraordinary well regarded.

The fifth company we'll make mention of is PayNearMe. PayNearMe is the next generation electronic cash payment platform. It served tens of millions of under-bank and on-bank residents of the United States allowing them to pay auto, rent, utility bills through retail locations. The company currently has relationships with 7-Eleven, Family Dollar and ACE hardware stores as they continue to aggressively expand their retail footprint and the breadth of this industry that the payment system covers. In the U.S. there's over $400 billion of currency in circulation with 1 trillion cash transactions taking place annually.

PayNearMe is focused on capitalizing on the velocity of the money of the under-bank, on-bank which is estimated to be 70 million to 100 million people in United States alone allowing them to pay cash for bills or other purchases that don't require credit card or bank account information, again a business that has extraordinary network effects. What we think is very compelling here is its network is very difficult to build, but now that they've got the (indiscernible) running, it really is a business that we see high barriers to entry with huge growth, again extraordinarily high quality investor group along with us which includes Khosla Ventures, True Ventures and August Capital.

Our last investment that we made in the quarter and again which is a huge, huge potential is the big data company Knewton which has creative an adaptive learning platform and the spiders (indiscernible) API for education with millions of pages of digital educational concept will run through the business engine to create the big knowledge graph. This graph further identified billions of connections in malwares, learning styles, content, instructional methods and it personalized a learning pathway in almost any subject for any user.

Effectively what the Knewton platform is doing is taking all of the world's both structured and non-structured educational content, putting them in this platform with every single click it's getting smarter and more personalized, more individualized for very word on the platform. Huge network effect opportunity and an extraordinary investor group that we are part of including Founders, Bessemer, Pearson the world's largest education publisher and then most recently Atomico which made their investment along with us. Now if you don't know Atomico that's the Skype people.

So, now I would like to turn to Slide 6 for the portfolio mix across the five growth themes that we're invested in as of December 31. You can see from the slide social mobile consists of 34.6% of our invested capital, cloud computing and big data is 20.6%, Internet commerce is 8%, sustainability is 9.6% and education technology is 27.1%. A core tenant of our investment strategy is identification of game-changing companies and intersection of mega trends across growth sectors. Based on our portfolio of 49 companies that we fit this profile class, the five things we estimate the average growth rate as I mentioned earlier of 85% from calendar 2012 to 2013. At the beginning of 2013 we said that every quarter going forward, we're going to highlight a key area of our investment portfolio on our key themes to keep you apprised of how these companies are changing the playing field and making headlines.

During our first quarter call, I spoke about education technology. In the second quarter, I spoke about social mobile. For the third quarter since our earnings call was just days after the Twitter IPO, I spoke in detail about our Twitter investment and the forces driving Twitter's exceptional growth and potential. Today I'm going to talk about sustainability theme and discuss some of the leaders that deliver open-headed growth potential in this category. We think it's important to showcase our values that's been created in our portfolio by companies, giving some color how the companies look at the time of our investment and what they've achieved to date.

I'll start with Solexel on Slide 7. So Solexel is a solar power company that's our seventh largest investment and represents 3.8% of our portfolio. Solexel is backed by Kleiner Perkins and SunPower amongst others and it's raised $170 million to date. Contrary to the current fashion we are very bullish on green technology in general and in particular the $80 billion solar industry, we think it's the classic situation where investors got very, very excited about the potential of this emerging industry that have lots of capital and when things didn't happen as quick as the people expected, they fled the industry. But in its wake, this $80 billion industry has kind of grown up and accordingly the fundamentals have developed a way that we think positions Solexel of being a truly disruptive company in this marketplace.

Solexel is developing high efficiency low cost crystalline silicon solar cells and what their innovative mass action products and product process do is design new lines of use of expensive materials while providing industry-leading performance, essentially what that means is with the lowest cost with the higher quality. And so as you know about the solar industry, typically either EPI on price or EPI quality, what we're so excited about here is we got both and as you can see SunPower has made a strategic investment. Raw material usage (indiscernible) solar modules substantially reduce cost when solar based electricity on their current path to true good [pairing] (ph).

Solexel has proven its core technology to (indiscernible) and we're looking forward this year is a scale to marketplace and again we think this is a very big idea and a very big potential opportunity. Once again we look at the management team, we look at the product and the potential and Mike Wingert, the CEO is in our estimation one of the most impressive CEOs certainly within the sustainability space.

So if we look at Slide 8, we've got Bloom Energy. Bloom Energy produces fuel cells that are designed to deliver clean, reliable and cost effective electricity at the customer site. You may have noticed there is quite a bit of activity cause of action in the fuel cell world this week. We think that Bloom Energy truly is a business that is one of a kind in this market that's starting to get quite a bit of attention. Data centers with large corporate campus will become early adopters of this technology and first to reduce their footprint independency on the electrical grid. Customers include Google, eBay, Coca-Cola, Walmart and other Fortune 500 companies. And if you look at the investors here, again Kleiner Perkins (indiscernible) NEA are on the forefront.

So to conclude my comments about the sustainability green technology theme it's become very clear in today's marketplace that companies can't just grow or just be green, it values both. And as we look at the grid, there's some opportunities there's a problem; the bigger the problem, the bigger the opportunity. Now we think in a global marketplace that we're in finding ways to be both grow or be green is a fundamental issue with huge potential for companies that offer innovative solutions to this marketplace.

So with that, I appreciate your attention. I'm going to turn the call over to Steve Bard for the financial review. Steve.

Stephen D. Bard

Thank you, Michael. I'll pick things up on Slide 9 with our financial highlights. As Michael indicated, our net assets as of December 31 were $288 million. That includes $7.2 million of cash and our net asset value per share was $14.91 as of the end of the year. This represents an increase of $33.7 million or $1.75 per share versus the September 30 NAV.

Now let's take a look at the attribution of that increase in NAV for the year ended 12/31. First, net operating expenses were $22 million or $1.14 per share. As a reminder, our operating expenses include things like management fees, cost incurred under our administration agreement, director fees, legal and audit fees, insurance, investor relations expenses and also expenses associated with our credit and our debt facilities.

This quarter that figure also included an accrual for incentive fees of $10.5 million or $0.54 per share. That's something that – the incentive fee will be payable to the management if the portfolio was liquidated on the last day of the year to a requirement under GAAP. The accrued incentive fees primarily attributable to the unrealized appreciation that we saw in holdings such as control for Facebook, Twitter and Palantir.

The second component of NAV is net realized loss on investments of $21.7 million or $1.12 per share. This figure included losses realized in AltEgo, Starfish, Serious, Top Hat and Kno. The third component of net asset value has been a change in unrealized appreciation which was $87.4 million. The same holdings that generated the accrued incentive fee were behind that unrealized appreciation, and again those were controlled for Facebook, Twitter and Palantir.

The final component I'd like to address is net aggregate deferred tax liability of $8.3 million. As you may be aware, GSV Capital filed an application with the SEC on December 3 to be treated as a regulated investment company or RIC for 2013. While we have not yet received the official word from the SEC, upon receiving the approval we would be reversing $7.2 million of that deferred tax liability when we file our subsequent 10-Q.

So when you combine all of the above, the net operating expenses, the net realized losses, unrealized appreciation and the deferred tax liability, GSV's NAV again is $14.91 per share as of 12/31.

I'd like to thank you for your attention. Now I'll turn the call back over to the operator to start the Q&A. Operator?

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). Our first question comes from the line of Jeff Houston with Barrington Research. Please go ahead.

Jeff Houston - Barrington Research

Hi, guys. Thanks for taking my questions. First question is – I'll ask one question then jump back in the queue. Just curious if you exited any positions in the fourth quarter and have you exited any positions so far in the first quarter? Thanks.

Michael T. Moe

Yes, the positions we exited in the fourth quarter were reflected in the – we didn't completely exit any position. With our public position, I think what we said pretty consistently is philosophically we will look for the earliest appropriate time to find liquidity. Generally speaking we're making a calculation of what we think the fair value is and what our stock is but not to lock up periods over after six months. We're going to be evaluating that very closely what we think is the way to optimize returns for shareholders. So you see that about a half of our Facebook position we did liquidate in the second half of 2013 not because we don't think Facebook is an amazing company. We think along with Twitter, we think those are still powerful growth companies that there is in the world. But we just know that people can buy public stocks on their own, so we look for is the valuations approach if we think there's value we look to actually even monetize those positions. So we haven't announced anything yet in terms of what we did will be done in the first quarter. I think it's safe to assume that as we see prices in the public portfolio appreciate where they get to places where – they start to approach places where we'll liquidate some or eventually all the position. So I know that's not specific as I'd like, I just don't want – we just want to make sure we're not saying everything that's completely correct and appropriate and so I just don't want to misspeak.

Stephen D. Bard

Right. This is Steve Bard. I'd just echo Michael's remarks and reiterate that Jeff when you see the 10-K, there will be a subsequent event section which will articulate the buys and sells that we've made since the end of the year through the day of the filing. So that will be something you'll be able to see.

Operator

Thank you. Our next question comes from the line of Christopher Nolan with MLV & Company. Please go ahead.

Christopher Nolan - MLV & Company

Hi, guys. A quick question. On the accrued incentive fee, can you give a little bit more detail on that, how that was calculated?

Stephen D. Bard

Sure. Jeff, this is Steve. I'm happy to feel that. And again I'll reiterate that that's something that is required under GAAP and for those that aren't familiar with the incentive fee calculation, it's actually fairly complicated. There are two components to it. It's a bifurcated calculation. The first calculation is we take 20% realized gains on an investment by investment basis and then we apply a hurdle. There's an 8% hurdle. We take either that calculation – the lesser of that or 20% of cumulative realized capital gains after netting out cumulative realized losses and unrealized appreciation. In this case and in most cases that calculation results in the lower number and so that's the one that we apply to arrive at the $10.5 million accrued incentive fee for 12/31 and again that's completely based on unrealized gains under the hypothetical assumption that you liquidate the portfolio on the last day of the year and that's something we need to do under GAAP

Operator

Thank you. Our next question comes from the line of Ed Woo with Ascendiant Capital. Please go ahead.

Edward Woo - Ascendiant Capital

Yes, I had a question – as well congratulations on the Twitter investment (indiscernible) really good homework for you guys. So going on to my question, I just want to ask you mentioned that the IT market is very strong. What about the market for private company valuation, do you see valuations getting out of control or there's still a lot of opportunities out there for you guys?

Michael T. Moe

Thanks, Ed. In terms of the private market valuations, it's really – we're seeing and you're seeing that reflected I think in some of the investments we're making is that in the – and again, we want to invest in the very best, fastest growing private companies in the world but we also want to pay a price where we think we can create substantial returns. And so I think that what we see in that is kind of a small handful, maybe a couple of handful of names valuations have been at places that we have trouble making the math for. But once you kind of get beyond those names, what we found is opportunities in businesses that we think represent tremendous kind of both risk return and where we can really get excited about what we think the IRR we can generate from our investments. So what does that mean for our profile? It is interesting because we are – I think it's a definite piece that we're seeing and we're focused on. And so when you kind of get in the zip code of let's call it 100 million market cap to 500 million, it gives amazing number of opportunities. But as you start to approach the kind of $1 billion club with the new finances there or beyond that, you start to see kind of all the acceleration of valuation. And so those are the ones that we've been careful about but yet I think generally speaking we think it's a good market for us. We're seeing great innovative businesses. We're getting access to incredible opportunities but we're being careful that – in terms of the names that we're focused on what we put in the portfolio.

Operator

Thank you. Our next question comes from the line of Jon Hickman with Ladenburg Thalmann. Please go ahead.

Jon Hickman - Ladenburg Thalmann

Hi. Thanks for taking my questions. Can you talk a little bit about – I don't quite understand this change in your now a RIC instead of a business development company?

Michael T. Moe

No, I'll let Steve handle it. No, I think we're basically a business development company but we filed for RIC status which is a different sequel, and again it's a prophecy that we think is relatively straightforward, we just haven't received the notice from the SEC that we qualified. And so until we get notified that we qualified, we reflect it as we don't and that's why you get that $7 million that we've earmarked. But we fully expect that this is going to happen but as it hasn't happened yet, we thought it was the most appropriate way to reflect it. Steve, anything to add to that?

Stephen D. Bard

Sure. No, I think Michael you hit it on the head. I guess I would just add that and reiterate it's always been our intent to be treated as a RIC. In the years since our IPO we have been treated as a C-corp. That has not been an issue because we've been generating net operating losses and there's been no tax impact on investors, there haven't been gains to distribute. On December 3, 2013, we applied to the SEC to qualify us as a RIC for the year that we just wrapped up. Again, as Michael said we're waiting for approval. We do expect to get that and we remain optimistic that we'll ultimately get that exemption before we have to file our tax return for the 2013 fiscal year. If and when that happens, we will reverse 7.2 million of the 8.3 million deferred tax liability. Thanks, Jon. Good question.

Operator

Thank you. Our next question is a follow-up question from the line of Jeff Houston with Barrington Research. Please go ahead.

Jeff Houston - Barrington Research

Hi, guys. Thanks for letting me jump back in here. In terms of your capital is structured as a business development company. I believe it must have 70% of net asset values and qualified assets otherwise there is some restrictions. Could you update us on what that mix was at the end of December and any restrictions and how that affects your thoughts for new investments?

Michael T. Moe

I'm going to let Steve as he has a very specific data in terms of where things are at but let me first just say what does that philosophically and what does that really mean. So basically under BDC, 70% assets will be in a core for good assets. Up to 30% can be bad asset. What's a bad asset? A bad asset is something that it doesn't – is not consistent with what the description of BDC investments are under the BDC provision. So for example a bad asset would be a private company that happened to be located outside the United States. We could invest theoretically in a public company with a market value of over 250 million and that would be a bad asset. What happens though you can make an investment in a company, it will be a good asset, but because the company went public and its market value can turn to a bad asset. So for example, Twitter investment which we made obviously when it was private, so it was a 100% good asset investment. Now it's public with 35 on our market value, it turned into a bad asset. What basically happens is we can't make any investment in "bad asset" companies, so we couldn't invest in Spotify today, for example, or Sino Lending which is another international private company, by the way we're running of China which we think is pretty cool and it's a very, very exciting business doing very, very well. But we couldn't make an investment in those companies today until our bad asset provision – the number of bad assets we have in the portfolio goes below 30%. Twitter by itself carries us – go ahead, Steve, give the very specifics.

Stephen D. Bard

Michael, some of those things were very [synced] (ph). Yes, I mean the bottom line is we can have up to 30% bad assets in the portfolio. Again, a bad asset is a non-U.S. company or a public company. In the case of Twitter it was private when we made the announcement and we got a nice problem because we got a triple on our hands and it now represents 35.7% of the portfolio. So just Twitter alone puts us in the domain of having more than 30% bad assets, but we got there organically. As long as we didn't buy our way into that problem, it's not a BDC issue – we're not running if that were BDC issues but as Michael said, we can't compound the problem by buying more non-U.S. interests or making additional investments in companies that are republic.

Michael T. Moe

Yes, so from a product standpoint it hasn't prevented us from making the investment that we wanted to make but it's something that will evolve and get – we will have that flexibility in the future when we get that to a later portion.

Operator

Thank you. Our next question comes from the line of Christopher Nolan with MLV & Company. Please go ahead.

Christopher Nolan - MLV & Company

Thanks for taking my follow-up. Back to the envelope, it seems like you have an 80% discount on the value of our Twitter position based on year end stock price of Twitter. Going forward how should we look at in terms of the discount that you guys provide shares which have a lock up?

Michael T. Moe

Yes, I'll let Steve again give – there's a very precise way that we go through – with our comments, but generally speaking the way that works is you start with a bigger discount – we almost always got a six-month lockup and you start at six months you're going to have a bigger discount because you can't touch those shares for six months. So there's going to be a bigger discount. And if that six months riddles down, the discount should go away to ultimately once the market has removed the discount with – almost certainly be removed. There's a formula based on that discount which was – again, it's by a process but ultimately we can go through it to get to sort of what's an appropriate place to value that discount. So you're right and that goes into Twitter case and that was exactly 80% of the discount – that the formula came up with as the appropriate window to market that. Steve, do you have anything you want to add to that?

Stephen D. Bard

The formula – for the nerds in the crowd, the formula is Black-Scholes and we're trying to assess the prospective volatility of returns of the stock and so as Michael said, we're typically locked up for six months. As we approach that six-month lockup, the discount for lack of marketability is going to decline from say – it could start out between 15% and 25%. It will ultimately decline to 0 when the lockup expires, but we use Black-Scholes and we also compare that to the cost to completely hedge the position by buying puts that mature at the same time as the lockup expires. But get it in the envelope and that's exactly the case with Twitter. You'll also see a little bit of a discount for lack of marketability for Control4 but that's out of lockup now.

Operator

Thank you. We only have time for one final question from the line of Jon Hickman with Ladenburg Thalmann. Please go ahead.

Jon Hickman - Ladenburg Thalmann

Could you comment on where the $11 million loss was on the quarter and also talk about the public filing for 2U?

Stephen D. Bard

Sorry, Jon. You asked us about the $11 million – you broke up, what was the first part of the question?

Jon Hickman - Ladenburg Thalmann

Yes, the net realized loss in the fourth quarter, the $11 million loss?

Stephen D. Bard

Sure. That was back to – the biggest chunk of that was Kno. Kno was one of our investments and throughout that's the biggest contributor to the loss during the quarter.

Michael T. Moe

And in regards to 2U I'm on the Board so I probably I have abundance of caution. I really can't comment too much other than the fact that they've obviously put their numbers in the market basically indicating that they expect to be on the road. And I think most likely that they'll be in the market in March.

Operator

Thank you. I would like to turn the call back over to management for any closing remarks. Please go ahead.

Michael T. Moe

Just in closing and once again we want to thank everybody for your interest in GSV Capital. I do believe that we've got an outstanding portfolio of some of the best private companies in the world and we also have a team that's working very, very hard every day to find the next what we call the stars of tomorrow and to create great returns for our shareholders. So we're looking forward to speaking in three months and giving an update in terms of our progress, but we're very, very excited about what we see our opportunity and what we've got in the portfolio. So thank you very much. Have a great rest of the day.

Operator

Thank you. Ladies and gentlemen, this does conclude our conference today. If you would like to listen to a replay of today's call, please dial 303-590-3030 or 1-800-406-7325 with access code 4672630. Thank you for your participation. You may now disconnect.

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