But for impatient investors looking for a way into Twitter stock before the social media company hosts its initial public offering, have no fear. There’s a way to buy Twitter stock right now — and share in a host of other red-hot tech companies, too.
As a closed-end fund, GSV Capital invests in other companies similar to the way a mutual fund would … except that it has a fixed number of shares that do not grow to meet new investor demand. As a result, a closed-end fund like GSVC can trade at a premium or discount to its book value based on sentiment, instead of the underlying value of its investments.
For instance, as an early investor in Facebook (FB) stock, this closed-end fund was battered as FB’s public offering sparked a host of negative sentiment. GSVC traded as a deep discount as a result, but Sizemore saw the closed-end fund as a big buy as traders were undervaluing its investments in FB and others.
With the Twitter stock IPO, things are different in GSVC now that the valuation of this closed-end fund has normalized. But there is still potential for early investors to get in and make some money. Here’s what Charles told me recently:
At the beginning of this year, GSVC was just about the most hated pick on Wall Street. The botched Facebook IPO had soured investor sentiment toward social media companies, and GSVC became a punching bag for all the Street’s frustration toward the sector. The stock was trading at a 35% discount to book value … a book value that was itself depressed by bad sentiment toward the underlying holdings. Pre-Facebook IPO, GSVC had traded at a large premium to book value of 20%-30%.
Today, GSVC has no significant stake in Facebook. But Facebook’s recent profit surprises have caused investors to rethink social media in general, and there is a general belief that Twitter’s IPO will succeed where Facebook’s failed. As GSVC has rallied, it now trades at a slight premium to book value, though again, the book value is itself a moving target.
If you believe that the Twitter IPO will lead to several more successful “new tech” IPOs, then GSVC is an excellent way to get access. The easy money has already been made, but I think another 30-50% upside over the next year is feasible if the animal spirits return to the IPO market. It’s really all going to depend on how successful the Twitter IPO is.
In other words, tread carefully but consider a stake in GSVC if you’re a big believer in Twitter stock. It may be your best — and only — way to buy into Twitter stock before the IPO.
Related Reading on Twitter Stock and GSVC
- Charles Sizemore recommended GSVC in January, and the closed-end fund is up over 40%. (The Slant)
- On the Twitter IPO as we know it thus far. (USA Today)
- Will Twitter stock appear on the NYSE or Nasdaq? (Bloomberg)
- Of course, I think the Twitter IPO buzz should be ignored altogether. (The Slant)
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.