Groupon Inc (GRPN), Zynga Inc (ZNGA): How to Invest In Twitter and Dropbox, Here

GSV Capital Corp (NASDAQ: GSVC) is a closed end investment fund established in 2011. It primarily invests in high growth venture back companies and some mid and large cap publicly traded companies. Its focus is on capital appreciation and it looks primarily to conduct transactions in the private secondary market, but does engage is select public market transactions. The idea of GSV is to have a vehicle for regular investors to participate in high growth private ventures such as Twitter and Dropbox.

Twitter Screenshot, Mukesh Verma, 4/3/2013, [2200 Hrs IST]The shares of GSV Capital trade at a discount to net asset value due to the high management fees and view that its investments in private firms are worth less than the fair value stated in GSV Capital Corp (NASDAQ: GSVC) financials. In addition, there is some additional discount applied to the value of its investments due to the more illiquid nature of private holdings. That said, trends so far in 2013 are more positive for IPOs. Year-to-date, 38% of IPOs priced above their initially stated range an increase from levels in recent years.

GSV Holdings

GSV has 47 holdings in its portfolio as of the end of 2012 and its top ten make up 60% of net asset value (NAV). Its largest holdings as a percentage of (NAV) are Twitter at 14.3%, Palantir Technologies at 8.3%, Violin Memory at 5.8%, Dropbox at 5.7% and Chegg at 5.6%. Facebook makes up 3.7% of NAV. As of the last report at year-end, GSV has a NAV of $13.07 per share, $252.6 million, a 3% decline from 3Q12. The decline resulted from a slight negative impact from Silver Spring Networks, discussed below, and total write off of Top Hat. The current market price of GSVC is 37% below NAV. Positively, management estimated that revenues of its holdings increased by 80% in 2012 and most of its top ten holdings had increases of 100%.

Silver Spring Networks Inc (NYSE:SSNI) was one of the funds problem holdings with a fair market value of $2.1 million at the end of the prior year versus the $5.1 million investment. Silver Spring Networks provides a platform for utilities to transform the power grid into a smart grid. Silver Spring Networks Inc (NYSE:SSNI) traded up from its IPO price of $17 per share and is currently trading at $18.57. The reported value at 2012 year end was $19.40 per share.

Poor Track Record

While management noted revenues of its portfolio companies moving in the right direction in 2012, that does not mean profitability is doing the same.