Destiny Tech100: Why I Wouldn’t Touch DXYZ Stock With a 10-Foot Pole

Will Ashworth

Thu, Apr 25, 2024, 3:00 AM 4 min read

“The Destiny Tech100 is a closed-end management investment company registered under the 1940 Act. We intend to invest in a portfolio of 100 of the top venture-backed private technology companies, providing everyday investors access to these private market leaders for the first time,” states the Destiny Tech100 website.

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And then it hit me. DXYZ is GSV Capital 2.0.

If you understand my reference, there’s probably no reason for you to read any further. If not, read on, and I’ll explain why an investment in DXYZ will likely end in sadness and misfortune.

The Concept Makes Sense In a Rational World

Who in their right mind would say no to owning an investment in 100 of the top venture-backed private technology companies? In a rational world, no one would.

But we don’t live in a rational world where investors do things that make sense. How else can you explain a nearly $5 billion market capitalization for Trump Media & Technology Group (NASDAQ:DJT), arguably one of the most overvalued companies trading on Nasdaq?

Here’s the thing. We’ve seen this movie before. The original version premiered on the Nasdaq in May 2011 under GSV Capital Corp.

“GSV Capital Corp. (formerly NeXt Innovation Corp., the “Company,” “we,” “our” or “GSV Capital”) was formed in September 2010 as a Maryland corporation structured as an externally managed, non-diversified closed-end management investment company,” stated page 8 of its June 2011 10-Q.

“The Company has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company is managed by GSV Asset Management, LLC (formerly NeXt Asset Management, “GSV Asset Management”).”

In its IPO, the GSV sold 3.34 million shares at $15, generating nearly $50 million in net proceeds.

Names held in its portfolio included pre-IPO companies such as Bloom Energy (NYSE:BE), Chegg (NYSE:CHGG), Facebook, now known as Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and several other investments.

Founder Michael Moe said then, “We are democratizing the process, which we think is pretty cool and compelling,” Barron’s reported in December 2011.

He’s talking about the venture capital industry.

What Happened to GSV Capital?

In August 2017, GSV founder Michael Moe resigned as CEO. He remained chairman while board member Mark Klein became CEO.

In July 2019, the company transitioned from external management (GSV Asset Management, Moe’s asset management firm) to internal management under Klein’s supervision. As part of the transition, it changed its name to Sutter Rock Capital Corp.

A year later, it changed its name to SuRo Capital Corp. (NASDAQ:SSSS), opting to retain the symbol. At the time, SSSS shares traded over $9. Today, they’re in penny-stock status below $4.

As of March 31, SuRo’s guidance for net asset value per share is between $6.90 and $7.40. At the midpoint of its outlook, the company’s shares trade at a 46% discount to its NAV.

As of March 31, it held positions in 35 private companies and three public. Its publicly traded investments accounted for approximately 8.4% of its $184 million portfolio of investments as of Dec. 31, 2023. It also had nearly $64 million in U.S. Treasury bills.

GSV/SSSS shares initially sold for $15 in 2011 but only traded above $20 in 2012. If you held your shares for 13 years, your compound annual growth rate would be -9.9%.

DXYZ Stock Is Likely to Face the Same Ending

As Morningstar.com’s Jack Shannon pointed out on April 18, DXYZ’s net assets at the end of 2023 were $52 million, or $4.84 a share. That’s a 512% premium to its net asset value at current share prices.

I don’t care what type of businesses are in its current portfolio of 23 companies — and by the way, they’re no more special than what GSV held back in 2011 — many of these will flame out as public companies once they go public.

History does repeat itself. I wouldn’t touch DXYZ with a 10-foot pole.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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Destiny Tech100: Why I Wouldn’t Touch DXYZ Stock With a 10-Foot Pole

In This Article:

The Concept Makes Sense In a Rational World

What Happened to GSV Capital?

DXYZ Stock Is Likely to Face the Same Ending

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