Hi Richard,
Breaking MVC radio silence, eh? I am not sure that I remember any stipulation that MVC has to invest the whole fund by the end of 2001. Where did you pick that up?
On the whole, I agree with your assessment. MeVC is an interesting play and, as you point out, has made post-bubble bursting investments (though the bubble seems to continue to deflate).
My one concern is that many of their investments are later stage investments, which in the go-go days were akin to free money as the robust IPO market would take those securities off your hands on a moment's notice. That is a lot tougher business these days. MeVC has been making some earlier stage investments, which is where the real bargain basement pricing (that you mention) should have the biggest effect. Earlier stage investing is inherently more risky than mezzanine investing, but with a portfolio approach and good picks, should also provide higher returns.
I still think that the big discount to NAV is an interesting opportunity and open question at the same time. Of course, I like the idea of paying 60-70 cents on the dollar for investments, but the open question part is the determination of NAV- which is basically a matter of discretion. The market may be saying, I don't care what share price you paid for these startup investments, the world has changed and those assets need to be marked down 25-50%. On the other hand, it also may be a question of a lack of understanding of the structure, lack of analyst coverage and a general psychological trepidation toward anything "tech" especially if it is anything "Internet." Tough call as to which is the dominant factor.
I have a small position on the theory that at least part of the reason for the big discount is reason number two and that the stock suffers from neglect and the curse of the pioneer. Only time will tell, but on balance for a speculative spice to a portfolio, I agree with your investment position. Anyone else want to chime in on the subject of the discount?
Cheers,
Thomas |
