Entering text into the input field will update the search result below

Best Way To Trade the Facebook IPO

Apr. 23, 2012 12:41 PM ETSVVC
SRCtrades profile picture
SRCtrades's Blog
9 Followers
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

With the exception of the price target, I agree with the previous seeking alpha posts (Evans Capital) on OTCQB:SVVC, both the short and the cover. I have blogged about SVVC several times - http://srctrades.blogspot.co.uk.

"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 OTCQB:SVVC.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You