- Firsthand Capital Management collected $33.8M in fees over a nearly ten-year period during which the SVVC stock price declined 78%
- Its pattern of re-investing in its poorest performing companies warrants additional scrutiny
- Investors Urged to Request that SVVC provide additional financial disclosure for the largest private portfolio companies given facts surrounding recent investments in these companies.
BOULDER, Colo. and SAN JOSE, Calif., May 14, 2021 (GLOBE NEWSWIRE) -- Rawleigh Ralls, a long-term investor and beneficial owner of 3.7% of Firsthand Technology Value Fund, Inc. (NASDAQ: SVVC), today outlines concerns surrounding lack of financial disclosure for SVVC’s top private portfolio holdings, IntraOp Medical, Hera Systems and WrightSpeed. Firsthand Technology Value Fund is led by Kevin Landis, Chairman of the Board, CEO and President, and Chairman and co-founder of Firsthand Capital Management, Inc., advisor to the Firsthand Funds.
Mr. Ralls’ concern is focused on Mr. Landis’ repeated, multi-year pattern of investing significant new capital in failing portfolio companies. Furthermore, it is apparent that SVVC has been the ONLY investor to fund these companies in recent years, based on SEC filings and Crunchbase.com. The pattern shows that Mr. Landis writes off his previous investments, in a “cram-down” round and invests new money to keep the total valuation of his stake in the companies at high levels. Not only has this proven to be a terrible strategy, delivering a negative 78% share price return over the nearly 10 years with Mr. Landis at the helm; but SVVC also appears to be the only investor at the table willing to fund these enterprises in their failed state.
It would appear that Mr. Landis is well aware of his poor performance managing the fund as the Firsthand Funds website treats SVVC as an ugly stepchild - providing no reference to its stock symbol, performance, NAV or even a datasheet - only a link to an external website.
QMAT Case Study
To illustrate this failed asset management approach, below is an investment chronology for former portfolio company QMAT, based 10-K filings from 2012-2019:
- 2012 - Initial investment $6M of Series A Preferred Stock, ending value $6M
- 2013-2015 - Over the next 3 years Landis invested another $8M, yet the value of that security didn’t change. Total invested was $14M and the position was valued at $14M at 12/31/15.
- 2016 - It appears Landis added another $2M early in the year, but the company must have faltered, as that now $16M investment was written down to $10.7M. However, the company must have needed more capital because Mr. Landis invested another $2M in a Series B Preferred Stock.
- 2017 - must have been a ‘better year’ as the $18M in Series A and B Preferred Stock were marked up to $19.5M at year end, however the company must have needed additional capital as it received a $2.75M Convertible Note from Mr. Landis.
- 2018 - was apparently not a great year for QMAT as the Preferred Stock investments were written down by almost 68% to $6.2M. Nevertheless, Mr. Landis presses his bet with an additional $4.25M convertible note.
- 2019 - QMAT went out of business and the Fund wrote off the entire investment to $0, taking what appears to be a $25M loss over 7 years.
Sadly, the QMAT investments were not a one-time mistake, but rather an unmistakable pattern that can be seen in other portfolio companies also written off to ZERO, such as Aliphcom, Telepathy and VuFine. Worse, the same investment fact pattern exists for current portfolio companies Hera Systems, WrightSpeed and IntraOp Medical, where Mr. Landis has continued spending SVVC fund holder capital, with no other co-investors, for years, presumably to keep these from being written off and enabling him to collect 2% annual management fees.
Given the extremely poor investment pattern and performance, investors should demand more financial disclosure from the Board, Mr. Landis and Firsthand Capital Management, prior to voting at the May 25th annual meeting. Key questions to evaluate the fund’s performance and holdings include:
- Are these companies properly capitalized?
- What are the last three years’ financials - Balance Sheet and Profit/Loss statements?
- Is SVVC the ONLY active investor in these companies?
- If so, why are there NO other investors interested in these companies?
- What is SVVC’s fully diluted ownership of these portfolio companies?
- How much cash do these companies currently have on hand?
- What is the current cash runway for these companies?
- How much additional capital will they need to reach cash flow breakeven, and where will that investment come from?
- Does the independent company valuing these portfolio positions take these facts into consideration?
- Why won’t Mr. Landis make himself available to shareholders, provide quarterly portfolio company updates and more detailed portfolio company financials?
Mr. Ralls urges investors to demand that the SVVC Board of Directors and Firsthand Capital Management host an investor Zoom meeting to discuss these issues BEFORE the 2021 Annual Meeting of Stockholders on May 25, 2021 - or to adjourn the annual meeting to provide sufficient time for such a meeting to occur.
Investors can request this meeting by contacting Mr. Landis or Phil Mosakowski, at:
| Kevin Landis Phil Mosakowski | 408-624-9533 408-624-9526 |
Rawleigh Ralls has over 30 years’ experience in the investment community, including an eight-year career at Goldman Sachs and as co-founder of two investment funds, Precept Capital Management and Lacuna Capital LLC. He is currently a director on six company boards, including one public (Tucows, Inc. Nasdaq: TCX) and five private companies in the software and technology space. Mr. Ralls has been on numerous other company boards, raised considerable investment capital and advised many public and private company management teams. Mr. Ralls graduated from the University of Arkansas in 1984 and received an MBA from Southern Methodist University.
IMPORTANT INFORMATION CONCERNING THIS COMMUNICATION
This press release is being issued pursuant to Rule 14a-2(b)(1) promulgated under the Securities Exchange Act of 1934. This is not a solicitation of authority to vote your proxy. I am not asking for your proxy card and will not accept proxy cards if sent. The cost of this communication is being borne entirely by Rawleigh Ralls.
Contact:
Rawleigh Ralls
rallsrawleigh@gmail.com