Tom, this is not a defensive post, so try not to take it wrong. Valuing SFE or ICGE as a closed end fund is simply misguided, since neither you nor I have the oppt'y to buy into early satage pre-IPO companies. While ICGE may have gotten ahead of itself, IMHO, the appropriate way to value it is using some % of the NAV -- you think it's 80% I think closer to 90-100%, but that's not the key issue. The real test is what *are* the private companies worth. In SFE's case they have been valued at nothing on many occasions, but when a home run is clearly in the pipeline -- such as when ICGE came out, and to a lesser extent when CATP or other "sure winners" were on deck, SFE ran up to accurately reflect the impending "dividend value".
What makes ICGE tricky is there are so many pipeline companies, IPOs are coming very quickly, and guaging the impending NAV vs the current NAV is getting very hard. That explains why ICGE is getting a premium to NAV. Is it the right premium? Who knows. I think it's too high, but not 10x too high, more like 20-30% too high.
But let's not kid ourselves and say we can replicate their portfolio on our own, since we can't. If all you want to do is own the public companies, then of course you can do so. But you still won't have their cost basis, nor will you get into any IPOs at offering.
What ICGE needs to do is accelerate its IPOs, exit its early investments, and refill the pipeline in order to show an ongoing ability to start companies, move on, and create a business around venture capital. How is that any different from a product release cycle or an ongoing service business? OTOH, if all they do is keep filling the pipeline and don't bring enough companies public, then it's like having slowing earnings, since all their earning power is derived from seed capital that goes public.
As an aside, Barrons, on the whole carries little weight for me, positive or negative. |
