A couple of weeks ago when Firsthand Technology Value Fund (SVVC) was trading at $46 a share, I recommended initiating a short position, because the stock was trading at an 88% premium to its Dec 31,2011 NAV per share, and the company filed with the SEC to raise money in a secondary offering. Yesterday, the company came out and announced that their NAV at March 31, 2012 was $24.56 per share, an increase of $0.64 cents from its year end Dec 31, 2011 NAV of 23.92.
Subsequent to the company announcing their first quarter 2012 NAV, they also announced they priced their secondary offering of 4.4 million shares at $27 per share raising 118.8 million dollars, and essentially diluting their Facebook (FB) position to 10%. The company initially filed to raise only $25 million in a secondary offering. For some reason the company raised their filing to $115 million. Remember, it is in SVVC's best interest to increase their assets under management as they charge fees as a percentage of assets. Unlike open end mutual funds, closed end fund shares cannot be liquidated, so those assets stick. The stock is now trading at $26.47 as I type, and this would be a good place to cover my hypothetical short position, locking in a 70 percent gain.
I think SVVC will trade in tandem with GSV Capital Corp (GSVC). Some may now consider SVVC a value play, as they improved their NAV and liquidity. The company has started investments in Gilt Group, and Solar City, which neither will be as large as Facebook. I think the stock price maybe goes to $27-$29 per share when Facebook begins trading but that may be about it. By diluting the stock, doubling the share position, SVVC killed the golden goose.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.