Do a Google (GOOG) search for the words “Twitter IPO” and you’ll come up with 149 million results. I’m no search specialist, but that seems like a decent amount. Everyone wants to chime in on Twitter’s IPO. One company that actually owns Twitter stock is San Francisco-based GSV Capital (GSVC), an investment firm founded by longtime growth investor Michael Moe. Last November I recommended investors read his book Finding The Next Starbucks: How to Identify and Invest in the Hot Stocks of Tomorrow. I also suggested that this closed-end fund, although fraught with risk, was worth exploring. Since then it’s up 128% through Oct. 21.
Does it have any more gas in the tank? I think so.
Over the past two years it’s raised $278 million at prices between $14 and $15 to invest in venture capital-backed companies like Twitter, Facebook (FB) and 40 others. Not all of them are going to be home runs, but enough should be to convince Charles Sizemore that GSV Capital isn’t expensive despite its 97% run-up over the past three months. He argues that its “real” book value is 10%-20% higher due to Facebook’s 108% run-up over the same period. In addition, it’s had two portfolio companies go public since the beginning of August: Control4 Corporation (CTRL) at $16 and Violin Memory (VMEM) at $9. GSV Capital invested a total of $21 million in these two companies with both currently showing decent if not spectacular unrealized gains.
GSV Capital has 15% of its portfolio invested in Twitter. Clearly, if the IPO is successful, it’s got plenty of upside. On the other hand if it does a Facebook-like stumble out of the gate, we’re looking at single digits once more.
It’s a risk — but one worth taking.