SuRo Capital is a public traded fund that invests in startups. It trades under the symbol SSSS. The company is a small-cap with a market cap of $200 million.
We bought a small speculative position in the stock, mostly because we like that they hold stock in a startup that is about to make an IPO. This startup is Palantir. Palantir is a data analytics company and an AI company. They help companies, governments use the data they have, and get insights from it. In our opinion, they are one of the most innovative companies in the world right now with their software capable of generating quality information from vast amounts of data.
We believe their IPO will be a very hot and hyped IPO, as many investors are eager to invest in Palantir. The IPO is rumored to be around September 2020, but it is not certain yet.
We bought SuRo Capital because 17.7 % of their holdings is Palantir stock. That represents approximately $30 million of Palantir stock. But the company seems to be valuing Palantir at a more conservative valuation than what we believe the IPO will be priced. SuRo Capital appears to be valuing Palantir shares at around $5.29, which represents a valuation of Palantir of around $7.5 billion. It is expected that Palantir’s revenue will be around $1 billion in 2020. Considering the current valuation of SaaS companies and the fact that Palantir will as a publicly-traded company represent one of the rare opportunities to get pure exposure to AI, we believe the stock will trade at 25-35x sales, therefore, be in the range of $25 billion – $35 billion.
If Palantir trades at a $25 – $35 billion valuation, the $30 million stake of SuRo Capital will be worth approx. $100 – $140 million, which would add $70 to $110 million to SuRo Capital stock. With a market cap of $200 million, that means a 35-55% upside in the stock from these levels.
Besides the 17.7% Palantir stake, we also like that SuRo Capital has 40% of its NAV in two “remote learning” startups (Coursera and Course Hero). Both of them are in a sector that is benefiting in this COVID environment.
Our thesis may change if the SaaS valuations start to drop drastically.
DISCLAIMER:
The article represents only the author’s personal opinion and shall not be considered financial investment advice in any way whatsoever. The author does not take any responsibility or liability for any decisions made by the readers based on the article. Nothing published by the UncoverAlpha constitutes an investment recommendation, nor should any data or content published by it be relied upon for any investment activities.
DISCLOSURE:
The author of this post is long SSSS. I wrote this article myself, and it expresses my opinions. I am not receiving compensation
for it. I have no business relationship with any company whose stock is
mentioned in this article. This is not financial advice. Please read the
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