This current period has seen ample uncertainty for sure but — and a record pace of interest rate increases, yet it lacks the existential threats that characterized the Internet Bubble and even more so, the financial crisis. The latter period also saw less bifurcation between small and large-cap returns, yet based on our preferred index valuation metric of enterprise value to earnings before interest and taxes, or EV to EBIT, the Russell 2000 finished 2023 not far from its 25-year low relative to the Russell 1000. On Slide 7; even with the increases in small and microcap stocks that we saw in Q4, the IWM to SPY ratio remains at historical lows. We continue to believe that the ratio says nothing about the fundamentals of the businesses that comprise each index given those fundamentals have held up better for many microcap companies than the index performance would suggest.
We think we’re at the end of the Fed hiking cycle. We are not in the camp that the Fed will be cutting rates anytime soon because we believe the economy will continue to show the resilience that it showed last year. That in our view is a positive, not a negative. Our portfolio companies do not require lower rates to execute and build value for shareholders. They benefit from the types of positive economic trends we saw in 2023 and continue to see in the beginning parts of 2024. And against that backdrop, we expect many of our holdings which are trading at historically low valuations, have a long runway to rise in value and help us increase our net asset value per share. Let’s look at a few of our current names. But before that, I thought I’d do something a tad different this call and review what we believe is a distinct part of our investment process, that is our constructive activism.
Turn to Slide 8. A few investors are willing to spend the time and energy identifying, conducting diligence on and actively engaging with companies to unlock intrinsic value. We believe the opportunity for value creation in U.S. microcapitalization [ph] publicly traded stocks exists because management teams and boards often prioritize revenue growth over operating profits, favor the status quo versus change, lack the understanding of buy-side investors and the workings of the public markets in general, do not appreciate the impact of flawed capital structure on shareholder returns and entrench themselves to protect their jobs and positions. To be clear, we are not corporate raiders. Our ultimate goal is to engage constructively with existing boards and management teams to unlock value through resolution of capital structure or other overhangs that we believe inhibit growth or shareholder value — of shareholder value; the realignment of financial performance to achieve growth of operating profits, not just revenues; the improvement in investor relations strategies and outreach; the evaluation of strategic options, including M&A, sales, divestitures; the identification of complementary talent and expertise; and the alignment of interest with and support from large shareholders.
There’s many ways that we can add value. We’re not adverse, however, to pursue changes through other routes, including private and public shareholder communications, proxy solicitations and/or joining boards of directors of our portfolio companies. All efforts, however, will be grounded and based on our fundamental research and diligence. We have different levels of activism, as you can see on Slide 9. Level 1 doesn’t require substantial time or involvement. Level 2, our suggestions start to become active. And Level 3, we work directly with management teams on specific outcomes, whether that’s board seats or specific overhangs that exist that are hurting the stock price of that company. On the next slide, you can see the types of specific ways we have utilized our activism.
The companies we own and the type of activism that we have utilized are listed on this slide. Sometimes our activism is outward and apparent like Comscore. In other cases, it’s quiet and behind the scenes. In no way, however, will we ever get involved in a company unless we have identified ways in which we think we can help a company and its share price recover. That is the opportunity. It could be suggested improvements to presentations and transparency; recommending various potential paths towards improving financial performance; as I said, developing structures and providing financing that results in simplifying capital structures; or joining boards. And in many cases, we’ve run strategic alternative processes for companies that have led to the sale of the company or certain of its assets.
My point in all of this is, never has the need been greater for the type of assistance that we can provide. And finally, on Slide 9, are 2 examples. Our involvement with Synchronoss has been one of collaborations since our initial investment. Synchronoss provides white-label technology that enables large corporations to offer customers cloud-based storage of personal data. Synchronoss’ platform powers the personal cloud offerings of a number of Tier 1 companies like Verizon, SoftBank, AT&T, Assurant, British Telecom and Tracfone under long-term contracts. We first invested in Synchronoss as part of an underwritten financing in June of 2021 that allowed Synchronoss to pay off its punitive preferred stock and recapitalize the company with reduced interest expense, while also providing flexibility going forward to execute on the strategic options for the business.
The first of these strategic alternatives was completed in Q4 of 2023 with the sale of Synchronoss’ noncore messaging and digital businesses. Synchronoss is now a pure-play cloud-focused business with high margins and is on the cusp of generating significant free cash flows. Our bullish view for 2024 is centered around a number of catalysts that we believe will improve Synchronoss’ balance sheet and demonstrate the operating leverage of the business. First, Synchronoss has stated that it expects to generate free cash flow and have other cash flows in 2024. That inflow of capital will allow Synchronoss to delever. Second, Synchronoss is expecting to return to top line revenue growth after the runoff of its historical deferred revenue and its continued growth in subscribers as largest customer, Verizon and its newest customer, SoftBank.
