GSV Capital Secondary Yields More Capital... At A Very High Price (GSVC)

GSV Capital Corporation (NASDAQ: GSVC) is the business development company that already owns shares of Facebook, Twitter, and others.  Now the company has announced that it has priced a follow-on offering of 6,000,000 shares of common stock at $15.00 per share.

The company’s gross proceeds from this offering were $90 million.   As for the use of proceeds, “The Company intends to use the net proceeds of this public offering to invest in portfolio companies in accordance with its investment objective and strategies, and for working capital and general corporate purposes.”  In short, it can go buy more shares of Facebook or other companies.

It has secured a rather large underwriting group for this offering.  Citigroup is listed as the sole book-running manager; Ladenburg Thalmann & Co., Lazard Capital Markets, National Securities Corporation, Aegis Capital Corp., and Maxim Group are listed the co-managers.  These underwriters were given a 30-day overallotment option to purchase up to 900,000 additional shares of stock.

The move has gutted existing shareholders, who now all face dilution from the upside that those shares of Facebook and Twitter and other portfolio companies.  Shares are down 20% at $15.45 and we have seen a whopping 6.2 million shares trade against an average volume of 255,000 shares.

These companies often dilute in secondary share offerings.  They often represent good opportunities for the new share buyers, but these offerings usually hurt the shareholders who originally came in thinking they had a certain percentage that is now far less.

JON C. OGG