O Happy Day, thanks for the Baron's article. Sounds like other analysts are valuing CMGI & ICGE at a multiple to their estimated holdings' value after their IPOs. To put WCAP in a similar light would require one to adjust basis for Eprise, Aeneid, MarketFirst Software, Screaming Media, Internet Gift Registries, Vivid Semiconductor, TeraStor, Pseudo Programs, Synquest, etc.
WCAP's average weighted ROI on basis for their 11 public holdings is 1125%. Putting this multiple on their private company equity values the private holdings at $69M. Adding to their public holdings of $154M, estimated asset value (EAV) is $223M. If WCAP traded at a P/EAV of 2.0 (less than CMGI's 3 or ICGE's 11), WCAP would trade at $83 per share.
I don't believe this is the correct methodology for valuing a VC firm. It is a snapshot of current holdings and completely ignores any potential gains in future years. Most companies are valued at a forward P/E (PEG) or PSR.
So I would look at WCAP's current and projected future earnings to establish a proper valuation range.
Traditionally VC's spun off 20-30% ROI for their investors. WCAP will spin off over $100M in gains this year (currently at $112M YTD). To buy the company outright and net 20-30% annually would put the market value on WCAP at $400-$600M, or $75-$112 per share. Same results, different methodology. On the upside, if WCAP took their $150M in liquid assets and reinvested it under a non-SBIC VC fund then I think the compounding of this $ would put us well over $1B in future market cap (12-24 month OL).
Regards,
TJ |
