GSV Hammers Holders With Another Stock Offering

GSV Capital Corporation (NASDAQ: GSVC) is taking it on the chin this morning because the company has sold another secondary offering of common shares so that it can go out and buy more portfolio investments.  This business development company priced a follow-on stock offering of 6,000,000 shares at a price of $16.25 per share.

GSV said that this will raise $97.5 million in gross proceeds. As for the use of proceeds this was said to be ” to invest in portfolio companies in accordance with its investment objective and strategies, and for working capital and general corporate purposes.”

Citigroup was acting as the sole book-running manager for the share offering; and co-managers are listed as Ladenburg Thalmann, Lazard Capital Markets, National Securities, Aegis Capital, Maxim Group, and CICC HK Securities.  These underwriters have been granted a 30-day option to purchase up to an additional 900,000 shares of common stock to cover overallotments.

GSV has sold shares before.  It sold 6.9 million shares in early 2012 and it sold 1.9 million shares last September.  Raising capital to buy more shares is probably an acceptable move for a business development company, but the company might want to consider that it is going to get a reputation for selling more stock each time its shares rise.  That would not be very popular for the investing community because they can wake up and find their shares down 5% to 10% overnight.

As a reminder, GSV is a company which owns shares of Facebook, Twitter, and other companies which are soon to come public.  This was even listed as one of the ways to play the Facebook IPO.  Shares are down 8.2% at $16.73 after closing at $18.23 on Thursday.  The 52-week trading range is $9.75 to $20.89.

JON C. OGG