Last week, GSV Capital (NASDAQ:GSVC) reported that Q214 NAV declined slightly to $14.86, compared to $14.91 in the prior quarter. In total, NAV increased roughly $2 or 15.5% over the $12.87 value in the prior year quarter. During the year, the publicly traded investment fund that invests in venture-backed private companies benefited significantly from gains in the largest holdings including Twitter (NYSE:TWTR). For the quarter, operating expenses were $5.9 million while changes in investments were roughly $4.2 million. The net difference leads to the small decline in NAV that was expected considering the decline in Twitter during the quarter.
The good news is that gains in recent IPOs including 2U (NASDAQ:TWOU) and TrueCar (NASDAQ:TRUE) helped offset expenses and declines in the top portfolio positions. The bad news that investors overly focus on are the $1.9 million in investment fees and $844 thousand of incentive fees. Investors need to understand that the fees are high and structured similar to a hedge fund, but the real issue is whether the fund generates a decent return. Ultimately, the roughly $2 increase in NAV is all that matters.
The original investment thesis "GSV Capital: The Low-Risk Way To Own Twitter" remains intact. At the current price of $10.20, GSV Capital needs to gain 45% in order to match NAV. For those interested in the Twitter angle, a 50% gain in that stock would increase a direct investment by 50%. An investment in GSV Capital would increase the NAV by roughly $2 per share to nearly $17. The investment fund would need to gain 65% in order to reach NAV. A similar loss would provide a 50% hit to Twitter investors while GSV Capital would still trade at significantly below NAV providing limited downside risk. Either way, the investment thesis of a deep value and the potential continued increases in NAV makes the stock extremely attractive at the current price.
Disclosure: The author is long GSVC. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.