GSV Capital Soars After Buying $6 Million Worth of Facebook Shares
Earlier today, a company named GSV Capital Corp (GSVC on the NASDAQ stock exchange) revealed that they had purchased 225,000 shares of Facebook at a price of $29.28/share via a "private secondary transaction" (Facebook has not yet gone public - that is expected to happen during the first quarter of 2012).
Anyways, GSV Capital Corp, which is a thinly traded stock (average volume of 43,710 shares traded per day) jumped on the news, closing the day at $14.57 per share, up nearly 42%. The stock continued to trade higher during the afterhours session, tacking on another $0.54 per share.
The company, which is a publicly-traded investment firm that focuses on private companies, purchased the shares from former Facebook employees via SecondMarket. Facebook shares have traded as high as $35 in the secondary market (which would value the company at a mind-boggling $85 billion), so GSV Capital was able to buy the shares at a "discount".
Shares of GSV Capital Corp rallied for two reasons today:
1) They managed to buy shares of Facebook, which is one of the most hotly anticipated initial public offerings of all time
2) They managed to get in at a "discount"
GSV Capital spent roughly $6.6 million on the transaction, which means that their shares have already increased roughly $1.3 million in value if we can assume that Facebook is currently worth $85 billion.
A nice trade to be sure, but does it justify a $16-$17 million increase in the company's market cap?
The situation with GSV Capital Corp. today kind of reminded me of how things were in the '90s when online trading really took off.
Back then, all a company had to do was issue a press release with the "magic word" in it and their stock would go absolutely ballistic. Some of the "magic words" that I remember:
Back in '97-'98, all a company had to do was issue a press release containing the words "Microsoft" or "Internet" and a pack of daytraders would soon show up, snapping up shares like a pack of rabid wolves. In 1999, the "magic word" was "China" - I still have "fond" memories of a stock (CPIH) that traded from something like $2 all the way up to over $80 in less than a week.. those were the days..
With the Facebook IPO just a few months away, I wouldn't be surprised to see more publicly traded companies trying to acquire shares of the social networking giant..
Filed under: General Market News