Here's the Price Where We'd Be Interested in Buying More of This BDC Holding
Today's pullback isn’t going unnoticed. We see more dividends ahead, and want to capture more of that stream.
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Shares of SuRo Capital SSSS are moving lower today following last night’s June-quarter earnings report that contained few positive surprises, given preliminary read-through for the quarter in early July.
The company’s net asset value per share came in at $9.18, between the $9.00-$9.50 range telegraphed by management, and up considerably from $6.66 per share exiting the March quarter. The bulk of that can be traced to the gains in its CoreWeave CRWV, Whoop, and Colombier II positions, which stood at $84.9 million at the end of the quarter compared to $42.5 million exiting the March quarter. And with SuRo’s latest dividend paid out last week, there was little to be said about the next dividend payment other than management reiterating plans to pay additional distributions throughout the remainder of the year.
We are maintaining our $9.25 price target for SSSS shares, which equates to roughly 1x its NAV per share value. We will continue to monitor its portfolio holdings and adjust our thinking for its NAV value per share and our price target accordingly.
We would remind you that our play with SSSS shares is a total return one, which means a combination of stock price appreciation and dividend income. With SSSS's weighting in the Pro Portfolio at just over 2%, we are interested in bulking up our exposure, and that means the pullback we are seeing today isn’t going unnoticed. Considering our last pickup was just below $8, should the shares drift back to that level, it would be a nice place to add to our holdings.
During the June quarter, public company exits generated gains of around $21 million, roughly $0.85 per share, but as we know, SuRo’s recent dividend payment amounted to $0.25 per share. On its own, this suggests a continued cadence of dividends, but we should also remember the IPO lockup expiration for CoreWeave shares is mid-September. There is also the expected monetization of SuRo’s Colombier Acquisition Corp II position (2.73% of its portfolio’s assets) as it was combined with GrabAGun on July 15 to form GrabAGun Digital (PEW). Based on those monetizations, we’ll have a better sense of upcoming dividend payments and the potential for SuRo to declare a special dividend late this year, given its business development company status.
Exiting the June quarter, SuRo’s had ~ $52.4 million of liquid assets, including approximately $49.9 million in cash and approximately $2.5 million in unrestricted public securities. Not included in its unrestricted public securities are approximately $40.9 million of public securities subject to lockup or other sales restrictions, which includes its remaining position in CoreWeave. Looking at CoreWeave’s portfolio table, that position has a cost basis of $15.2 billion, which implies a hefty gain, subject to where CRWV shares are trading when the IPO lockup expires.
During the earnings call, management reviewed its larger holdings, which include a position in OpenAI via ARK Type One Deep Ventures Fund LLC shares. Exiting June, that position was SuRo’s second largest behind its remaining CRWV play. OpenAI recently closed a second tranche of its $40 billion financing round at a $300 billion post-money valuation, with indications that tranche was oversubscribed by approximately 5x.
In the last 24 hours, several publications, including the Financial Times, Reuters, Bloomberg, and The Information, have reported that OpenAI is now in discussions to conduct a secondary sale at a valuation of $500 billion. If completed, it would lead to another markup of SuRo’s OpenAI position, which stood at $27.8 million exiting June compared to its $17.7 million cost basis. That would help give some lift to SuRo’s NAV per share.
We will continue to monitor the IPO market and new filings, closely watching for ones from SuRo’s other private company holdings. Potential candidates include Liquid Death, Vast Data, and Canva, which accounted for 4.5%, 5.5%, and 6.0%, respectively of SuRo's investment portfolio at the end of the June quarter.
At the time of publication, TheStreet Pro Portfolio was long SSSS.
