German Startups Group (GSG) opened its secondary shares trading platform on schedule as a first step in the transition to an asset manager and market place. The next steps in the development of the platform include the launch of the G|S Tech50 Fund and planned co-operation with SharesPost to open the US market to German investors. The platform has yet to prove its success and grow in scale, but a successful transformation could potentially create value beyond the existing NAV per share. After accounting for post-balance sheet events (a share buyback and transaction yielding a €1.6m revaluation gain), we estimate the current discount to NAV at 42%.
GSG reported basic EPS of €0.14 in H118, which is equal to the total EPS in FY17. Taking into account the recent €3m convertible bonds issue, diluted EPS came in at €0.12. Investors will be able to convert bonds into GSG shares in 2023 at c €2.50 per share, ie 58% above the current share price. GSG did not exit any positions during H118 and results were mostly driven by revaluations of the key holdings in its portfolio (€2.7m vs €0.9m in H117). In total, during H118 GSG invested €3m in follow-on funding rounds and made an initial investment in Chrono24.
On 19 June, the secondary shares trading platform G|S Market was launched and the first transactions were already settled. The platform could contribute to GSG’s business development – as a source of stable cash flow derived from commissions, and a support to GSG’s own portfolio management activities. As of 8 October, 10 offers are available, and GSG plans to exceed 50 by the end of 2018. The next steps in the development of the platform include the launch of the G|S Tech50 Fund and potential co-operation with SharesPost to open the US market to German investors.
GSG’s current share price of €1.46 represents a 39% discount to NAV at end-June 2018 (based on the book value of equity ex-minorities). Taking into account events after the reporting period, the share buyback and revaluation gains, we estimate that the discount increased to 42%. Importantly, the discount may be understated, as the valuation of minority holdings is mostly based on historical transaction prices. In June and July GSG bought back 230k shares and intends to conduct further share repurchases in the future.