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  • Best Way To Trade the Facebook IPO

    With the exception of the price target, I agree with the previous seeking alpha posts (Evans Capital) on SVVC, both the short and the cover. I have blogged about SVVC several times -

    "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." Evans Capital.

    I believe SVVC can run to the mid $30's prior to the FB IPO, thus represents a strong buy at current prices.

    1. SVVC is an illiquid micro cap and is a proven runner. At recent highs ($46.50), SVVC was trading at 190% of book value. An extreme valuation caused by liquidity and FB hype.

    2. GSVC is a similar company to SVVC. It has a reasonably significant FB holding (7%) and has been trading at a large premium to book value (20% to 33% - estimated book value of $15). GSVC raised over $100m at $15 in February. The stock dropped to $15 and has since traded at previous highs. The recent pullback has been caused by yet another stock offering.

    I think SVVC can perform at least as well as GSVC has done post capital raising. 20% to 33% over $27 (SVVC 's capital raising price) gives a price a target between $32.4 to $36.9 before FB IPO (late May).

    With the market digesting the recent capital raising, the current price of $26.2 gives a great entry point, offering potential profits of 40% (IRR 500%) in less than a month. Excitement over the FB IPO will be extreme over the next month, this is the best way to play it.

    Disclosure: I am long SVVC.

    Apr 23 12:41 PM | Link | Comment!
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