SuRo Capital Corp. (SSSS) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, thank you for standing by. Welcome to the GSV Capital's First Quarter 2018 Earnings Conference Call. [Operator Instructions] This call is being recorded today, Tuesday, May 8, 2018. I will now turn the conference over to Nick Franco. Please go ahead.

Thank you for joining us on today's call. I'm joined today by GSV Capital Executive Chairman, Michael Moe; Chief Financial Officer and President, William Tanona. Please note that a slide presentation that corresponds to today's prepared remarks by management is available on our website at www.gsvcap.com under Investor Relations presentations. Today's call is being recorded and broadcast live on our website, gsvcap.com. Replay information is included in our press release issued earlier today. This call is the property of GSV Capital Corp. Any unauthorized reproduction of this call in any form is strictly prohibited. I'd also like to call your attention to customary disclosures in today's earnings press release regarding forward-looking information. Statements made in today's conference call and webcast may constitute forward-looking statements, which relate to future events or our future performance or financial condition. These statements are not guarantees of our future performance or future financial condition or results and involve a number of risks, estimates and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including, but not limited to, those described from time to time in the company's filings with the SEC. Management does not undertake to update such forward-looking statements unless required to do so by law. To obtain copies of GSV Capital's latest SEC filings, please visit our website at gsvcap.com or the SEC's Web site at SEC.gov. Now I'd like to turn the call over to Michael Moe.

Thank you, Nick. We are pleased to share results of GSV Capital's first quarter 2018. First, I'll review the recent quarter, including key initiatives we executed to enhance shareholder value, then I'll turn the call over to our Chief Financial Officer and President, Bill Tanona, who will provide a brief financial overview and open up the call for questions. Let's start with Slide 3. At the end of the first quarter, net assets totaled approximately $211 million or $9.99 per share. This is up from approximately $205 million or $9.64 per share at 2017 year-end and $196 million or $8.83 per share at the same time last year. Successful IPOs for Dropbox and Spotify headlined strong first quarter momentum in the GSV Capital portfolio. At the same time, we have continued to execute key initiatives to systematically enhance shareholder value, specifically, in 2017 GSV Capital's board authorized a $10 million discretionary open market share repurchase program through November 6, 2018. To date, we have repurchased approximately $6.2 million in shares or common stock under the program, including $1.2 million in the first quarter of 2018. We are pleased to announce today that our board has authorized $5 million expansion of the program to an aggregate of $15 million, which leaves $8.8 million for repurchases under the program. A second noteworthy initiative announced on March 23 was the pricing of a $40 million aggregate principal amount of 4.75% convertible senior note due in 2023. We are thrilled to have the support of world-class institutional investors and believe this instrument will create value in a few specific ways. First, we intend to use the proceeds as well as additional cash on hand to repurchase or pay at maturity GSV Capital's $50 million of outstanding 5.25% convertible senior notes, which mature on September 15, 2018. The new instrument in other words, is effectively a $40 million extension at a 50 basis point discount. As of March 31, 2018, GSV Capital's cash position was approximately $90 million. Secondly, by this extension, the new instrument will create a broader capacity for GSV Capital to make new portfolio investments and premier VC-backed technology companies with the line of site to IPO or a significant liquidity event. To frame the opportunity, CB Insights identifies 355 IPO pipeline companies today. This group has raised over $104 billion in aggregate and more than $75 billion since 2015. Third, the new note will also enable us to opportunistically make fall investments in portfolio companies of GSV Capital to continue to demonstrate strong growth fundamentals. A third initiative is the implementation of a comprehensive adjustment to GSV Capital's advisory fee structure. On February 5, 2018, we announced that GSV Asset Management would forfeit $5 million of its previously accrued but unearned incentive fee, which resulted in an addition of approximately $0.24 per share of NAV in the first quarter. Finally, we continue to focus on prudent opportunities to reduce expenses. On the first quarter for example, we lowered the opening costs incurred under GSV Capital's administration agreement by 20% versus the same period last year. Please turn to Slides 4 through 6 for a review of notable developments in the GSV Capital portfolio in the first quarter and subsequent to quarter-end. On March 23, Dropbox completed a successful IPO trading up 40% for the day as investors embraced the fastest software-as-a-service business to reach $1 billion in revenue run rate to-date. Today, the company trades at approximately $30 a share, a gain a 43% from its listing price. As of March 31, 2018, GSV Capital held 874,990 shares of Dropbox at fair value of $24 million or approximately $27 per share. The Wall Street Journal reports that the median analyst to price target for the company is currently $34 with a high of a $40 price target. As we've communicated in the past, our intention is to monetize public positions at a time that will maximize shareholder value within 18 months of a portfolio company going public or 12 months after any relevant markup has expired. We remain very bullish on the outlook for Dropbox. In its S-1, Dropbox reported 2017 revenues of 1.1 billion, this is up from 604 million in 2015, a 35% compound annual growth rate of its revenue for the period.\ Gross margins nearly doubled over that span, improving from 33% to 67%. We believe that Dropbox is clearly a long-term competitive advantage in enterprise by locking powerful and disruptive network effects. Dropbox reported more than 11 million paying customers at the time of its filing, including 300,000 businesses and over half of the Fortune 500. Remarkably, over 90% of the company's revenue originates from self-service channels, individuals who purchase a subscription through the app or website. Employees, in other words, want to use the technology they use at home. Today, Dropbox has over 500 million users across 180 countries, including 100 million new users added since the beginning of 2017. It's scheduled to release its first earnings report this Thursday, May 10th. A second key development is the portfolio -- in our portfolio was Spotify's successful direct listing on the New York Stock Exchange on April 3rd. As expected the company opted to forgo traditional IPO, which means there is no formal share offerings, underwriters or lockup period for current investors. Today, the company trades at approximately $150 per share, following a 40 is to one stock split announced before the listing. As of March 31, 2018, GSV Capital held 235,360 shares of Spotify, at a fair value of $31 million or approximately $132 per share. Last week, a slew of leading investment banks initiated coverage of Spotify and issued price targets. Goldman Sachs, JPMorgan, Evercore and Morgan Stanley, all pegged the company's price target at $190 per share. Bank of America Merrill Lynch came in at $195 and UBS at a price target of $200. The Wall Street Journal reports that Spotify's median analyst price target is currently $180 with a high of $220. We believe that Spotify continues to demonstrate significant upside with potential based on strong operating fundamentals and growth initiatives. In its first earnings report last Wednesday, the company announced revenue and user growth that was in line with forecasts. As of the first quarter end, Spotify reported over 75 million subscribers and 170 million users overall. By contrasts Apple music reported 40 million users on April 11th. Beyond the headline numbers 2 key metrics developed. First, the average monthly premium churn rate hit a record low, falling below 5% for the first time, which is fairly remarkable when you think of the young demographic that Spotify has. It has such a incredibly low churn. Secondly, gross margin reached 25%, which surpassed Spotify's most recent estimates. For context, Netflix operates at approximately a 35% gross margin, and we believe Spotify's continuing improvement in this area will be a major catalyst for the stock. And a third key development for the portfolio, GSVlabs announced on April 9th that it completed a Series C financing of approximately $7 million at a $25 million pre-money valuation. The rounds led by outside investors. As of March 31, 2018, GSV Capital's evaluation for the company implied an enterprise value of approximately $18 million. We're also excited to report in conjunction with the financing, GSVlabs announced the hiring of a new CEO, Nikhil Sinha, to lead the platform's global expansion. Nikhil brings a unique blend of experience, spanning venture capital as well as executor roles in both corporate and academic sectors. He is an accomplished VC. He cofounded and successfully exited two technology companies, and more recently, he launched a major University in India. Nikhil is the Director Emeritus of the U.S. India business counsel and a member of the advisory board of the Annenberg School for Communication at the University of Pennsylvania. A final key portfolio development, subsequent to the first quarter end was the acquisition of General Assembly for $413 million by the European human resource and staffing firm, Adecco. We're thrilled for the General Assembly team and believe Adecco, which serves over 100,000 businesses can help meaningfully accelerate its expansion into the enterprise. GSV Capital initiated the position of General Assembly in 2014, and we believe the acquisition price aligns with our current valuation for the company. As of March 31, 2018, we held General Assembly at fair value of $9.6 million against a cost basis of $6 million, which represents a return of approximately 68%. The acquisition was announced on April 16, during the ninth annual ASU GSV Summit, which attracted over 4,000 attendees from 40 countries as well as 450 presenting technology companies. Notable keynotes include the former U.S. and Mexican presidents, George W. Bush and Vincente Fox. Angela Duckworth, who authored the best seller Grit, education activist, Matthew McConaughey, and John Legend and many others. The New York Times described the summit as a must-attend event for investors in education and talent sector. And we believe it creates key advantages for GSV Capital. Not only is the summit an engine for unique deal flow, it's a platform to promote and connect major portfolio companies like General Assembly, Course Hero and Coursera. Please visit asugsvsummit.com to access a video library from the event. Turning to a broader review of the portfolio, GSV Capital's top five positions as of March 31, 2018, are Palantir, Spotify, Dropbox, Coursera and GSVlabs. These positions account for approximately 59% of the total portfolio at fair value, excluding treasuries. Our top 10 positions account for 83% of the portfolio. By comparison, as of March 31, 2017, GSV Capital's top five positions accounted for just 39% of the portfolio at fair value, excluding treasuries and the top 10 positions accounted for 60%. This reflects our continuing strategy of increasing the size per-position of our investment portfolio and reduce the number of portfolio holdings. As a result of this objective, as of March 31, 2018, there were 29 companies in our portfolio compared with 39 a year earlier. And going back several years, we had as many as 60 portfolio companies. Why this is important for investors, as we can now look at what is the top five positions and 59% of the portfolio or the top 10 positions being 83% of the portfolio and can readily determine for themselves the fair market value and NAV for the majority -- the bulk of the portfolio, which we think will be additive to creating consistency with where the stock trades and what NAV is. Looking ahead, we believe that GSV Capital's portfolio is well-positioned against a strong environment for leading venture-backed companies. Let me give you some context for that. There's been 65 U.S. IPOs in 2018 according to Renaissance Capital and our research affiliate, GSVIQ. This is a 28% increase over the same period last year. To date, 19% of the companies are priced above the range and 61% are priced in the range, which is consistent with a normal to healthy IPO market. And importantly, -- as we look at this, we monitor this on a weekly basis. In our strong view, while we have a healthy market, it's not overheated. Total IPO proceeds stand at $19.3 billion to-date, a 28% increase year-over-year. To illustrate what a meaningful change this represents, IPO proceeds for an entire year in 2016 were only $18.8 million. The strong IPO market has been masked by robust VC investment activity to-date, according to KPMG's, Q1 venture post report, VC invested a record of $28.2 billion in U.S. companies across nearly 1,700 deals in the first quarter of 2018 alone. And global investments topped $49 billion. We believe these trends bode well for top GSV Capital names, including Palantir and Lyft, which continue to be popular potential IPO candidates. On March 14, Lyft announced that it received a $200 million investment from the global oil parts manufacturer, Magna, an extension of the alphabet-led Series H financing announced in October 2017. Lyft is now valued at $11.7 billion. According to reports from Bloomberg, Lyft entered 2018 controlling approximately one third of the U.S. ridesharing market, up more than 60% year-over-year, and we believe it's gained more ground to date. The company reportedly generated well over $1 billion in net revenue in 2017. This, the amount of money it cashed after paying drivers, more than doubling 2016 performance. As of March 31, 2018, Lyft was GSV Capital's 7th largest position at fair market value of $12.2 million. To conclude, I'd like to remind you that GSV Capital's annual Investor Day is scheduled for Wednesday, May 30, from 1 P.M. to 5 P.M. at GSVlabs in Silicon Valley. The event will feature presentations from portfolio company CEOs, and we'll share our perspective on the key trends driving the global growth economy. If you'd like to attend, please register using the link at the top of our website, gsvcap.com. It will also be live streamed, which you can access from our website as well. Thank you for your continued support. And I hope I see you on May 30. With that, I'll hand it over to Bill.

Thank you, Michael. I'd like to follow Michael's update with a more detailed financial overview of our results as well as an update on our share repurchase program, our expense reduction initiatives and our current liquidity position. We are pleased to report that we ended the quarter with an NAV per share of $9.99. A breakdown of the change in NAV during the quarter is shown on Slide 8, which is consistent with our financial reporting. In sum, the $0.35 per share increase in NAV during the first quarter was driven by $0.38 per share of net unrealized appreciation of investments and $0.03 per share of accretion from our share repurchase program, which was partially offset by $0.04 per share of net realized losses and a $0.02 per share reduction from the early extinguishment of debt related to the repurchases of our 5.25% convertible senior notes due September 2018. Our net investment income this quarter was slightly positive due to the $5 million incentive fee waiver we announced earlier in the quarter. Our management team continues to be focused on optimizing the company's current expense base, and we have implemented a number of key expense reduction initiatives that will benefit our shareholders, including the previously announced permanent reduction in the management fee to 1.75%, and a waiver of $5 million in earned but unpaid incentive fees. Also since GSV Capital is currently carrying a larger cash balance than it would in an ordinary course of business, GSV Asset Management will continue to waive its base management fee on any cash balances until the convertible senior notes due 2018 mature or the date all of these notes have been repurchased or redeemed, whichever is earlier. In addition to the management fee and incentive fee waivers, our expenses related to cost under the administration agreement declined about 20% year-over-year in the first quarter. This follows a 26% reduction in 2017 and a 5% decline in 2016. We will remain diligent about managing our expense base moving forward. In the first quarter, the company repurchased approximately 180,000 shares of GSV Capital common stock under the share repurchase program for $1.2 million or an average share price of $6.90 per share. No shares were repurchased since quarter end. However, as Michael mentioned, we're happy to announce that the Board of Directors has authorized a $5 million increase to the share repurchase program, which leaves us with approximately 8.8 million authorized for future share repurchases under the program. Finally, a brief comment on liquidity and our convertible notes. We ended the first quarter with about 114 million of liquid assets, including $90 million of cash on the balance sheet and 24 million of marketable securities subject to certain sales restrictions. In addition to the cash and marketable securities, we also have 12 million available to us under the undrawn credit facility. As a reminder, we have about $50 million of our convertible notes maturing in September of this year for which cash will be used to satisfy those obligations. Despite the pending maturity of these notes, we still have ample cash to make opportunistic investments in the next generation of leading VC-backed growth companies. That concludes my comments. And we'd like to thank you for your interest in GSV Capital. Now we'll turn the call over to the operator to start the Q&A session.

[Operator Instructions] And we'll take our first question from Ed Woo with Ascendiant Capital.

Congratulations on the Dropbox and Spotify IPOs. What do you think is the next company that may potentially do an IPO? Is there any update on the fit status of Palantir?

Well, Palantir is a business, which continues to do very well. The company indicated over a year ago that it now saw the IPO route to be the most likely. And I think it's our belief that Palantir, we're in an environment that is receptive to leading software businesses like Palantir, I mean, it's a tremendous business, they have a diversified portfolio of customers at this point. So I think it's certainly possible that the company would be public this year.

For our next question, we'll go to Jason Ringer with -- next we'll go to Joseph Garner with Emerald Advisers. Excuse me, first, we'll take Jason Ringer, JSR Capital. Please go ahead, and ask your question.

Could you just talk a little bit about your decision to raise capital, yet at the same time, expand the buyback. It's a little confusing, I think, to some investors.

Well, what we have done from a -- we did as we have looked at on an ongoing basis, where the price of the shares is versus NAV. And what the board's authorized procedure, where if the share price is within -- below a price that we think is way too low, we think it's too low today, it's authorized us to buy shares. And we have a procedure process to look at it. When we did the convertible debt offering, the share price was much higher than it is today. I mean it was -- I don't have it in front of me but it was approximately $8 and

It was close to $9.

Yes, close to $9. So obviously, with the share price down below $7. It -- we think that's -- they have more capacity to buy back shares, if it persisted at levels that we thought was in our shareholders' interests to be buying back stock, that's what we'll do.

And Jason, I would just add. As you know, we have the convertible notes which come due in September. We had accumulated a pretty meaningful cash position in order to pay for that maturity. We obviously wanted to also have cash to make investments into the future, and we saw the opportunity to go out there and raise the additional capital at what we felt was attractive terms, so we could go out there and make additional investments. Clearly, with the Spotify direct listing and the Dropbox IPO, we've also come into to significantly more cash and marketable securities and given where our stock price is today relative to where it had been at the time of the convert, I think the board ultimately thought it was a good idea for us to have that ability to go out there and repurchase shares, if the price dictated that we should do so.

For our next question, we will go to Joseph Garner with Emerald Advisers.

First, I'd like to congratulate you on another very successful ASU GSV Summit. And I wholeheartedly agree with the New York Times' comments on that. So congrats there.

Thank you.

And my question, and it's a two-part question. The first part of it is, noticed that you made an additional investment in Aussie Media. So wondering if you could give us a little bit of an update there and how you've seen the valuation for Aussie Media trending lately? And then secondly, now that you've raised that additional capital, can you talk about your thoughts on pace of new investment activity going forward?

I'm sorry, the second part of your question, I didn't hear.

Sure. With -- having raised the additional capital, just wondering if you could talk a little bit about what your thoughts are around the pace of new investment activity going forward?

Yes, as it relates to Aussie's, the investment was a small promissory note. And I think, as we look at Aussie as a business. One, I think it's exciting to see the kind of multi-faceted media business they're building, both online with events and with well regard -- well received TV programs, which is unusual for a business of its -- of its stage of development. The growth of the business is going about 100% year-over-year revenue. Like a lot of emerging growth businesses, it needs capital. And so, the small investment we made, reflects that. But we're very optimistic about the outlook and potential for Aussie. It does have a very dynamic CEO in [Karl Swanson]. As you saw at the summit, he interviewed President Bush, which was -- he did a great job with it. He's got Aussie Fest coming this summer in Central Park, which I think is a really interesting asset that they're building. And they haven't announced their headliners yet. But it's going to be great. And so the TV shows are going great. Their websites keeps them moving along. And the events are interesting. As it relates to the cash that we have, I think it's important -- this is really been -- I mean, this has been the strategy that we've been working towards for the really, past over three years. And so now it's starting to get pretty evident, which is one, we're going to have fewer positions. And the reason for that is it -- we believe it makes it better, easier for somebody to understand what's in our portfolio, calculate the values because it's not 60 names, it's 29 names. And additionally, the names that will be going in the portfolio, are going to be later stage emerging growth names, where there's going to be typically more information, public information, known available. And probably have greater familiarity with investors, just as an overall, as obviously, have Spotify and Dropbox, Palantir, and you go back Facebook and Twitter. I mean, that's the kind of genre that you should expect the portfolio to made up of those kind of later stage premier VC-backed names. As opposed to what we did -- you go back to when we started, it was a combination of those type of names and then earlier, high-risk type of situations. And so we think, for the public -- for public business, having fewer names, having larger, larger names, we think that's going to be very beneficial to our shareholders as it relates to how the stock tracks versus the NAV. And in terms of how we're thinking of that, again, we -- not -- I mean I think it's -- the way that we look at this year, with our current expectations of cash, we'll have the opportunity to make at least four investments and I think you can expect from those four investments, is that they're going to be -- what we would like to do, is to make -- for the later stages, is to make additional investment, add to it as we get opportunity, both through confirmation of liking what's going on as well as hoping to get opportunistic ways to get the most attractive prices. But it would be a great objective that we have no fewer than four new names and again high-profile, important and fast growing, leading companies that will have meaning positions and between now and the end of the year, at least. And -- but again, it'll be really focused on -- we're working very hard as we speak to get what we consider to be the best VC-baked private companies in the world into our portfolio.

[Operator Instructions] For our next question, we'll go to Cindy Boyle with Wells Fargo.

Two-fold questions. In that Spotify came public after the quarter, how you're carrying Spotify? And to what -- do I understand, with the $40 million in cash on the balance sheet, that's the real reason for the drop? And expected net asset value from the actual net asset value?

So in terms of where we carrying Spotify at -- at the end of the quarter, it was at $132. Today, it's $150. So what's reflected in NAV is $132, and on the cash question, no go ahead.

Cindy, the cash question, I didn't understand what you were asking.

In other words, you raised $40 million for the quarter, which, I mean, I guess, how did that impact the NAV? Did it impact the NAV for the quarter? And how come it was ... with the extraordinary success of Dropbox and Spotify, one would have expected the NAV to be higher than $9.99. They both went up, what dropped during the quarter?

So Cindy, I would say a couple of things. One, if you look at where we had Spotify marked in the fourth quarter relative to the third quarter, there wasn't much in the way of incremental increase. And as you know, from -- many of the conversations that we've had, that there's an active market, or there was an active market in terms of secondary purchases in the private market for Spotify. And so the price that they actually did their direct listing at was pretty indicative, also at the end of the fourth quarter. So we didn't necessarily see that same bump until after the quarter ended. That would be, sort of, the first comment I would make. And then as you know, there's obviously names in the portfolio that have -- go down as well, and we had some of those offsets in the portfolio as well. I think, if you look at the portfolio, probably the biggest contributors to the downside in the quarter was Curious, was probably the biggest one that was the decline, followed by Lytro -- oh sorry, followed by General Assembly and then Lytro. So we had some offsets in the other names in the portfolio. If I looked at the value of the portfolio for the top five versus the bottom five, there was probably $6 million difference between the appreciation of the top five versus the bottom five.

We'll now take a follow-up from Ed Woo with Ascendiant Capital.

Michael, this is more a high level, that you announced in years arising Silicon Valley. But what are some of your themes that you're seeing out there, has it really changed much in 2018 so far?

Yes. I mean, the themes that we're focused on that might be, I mean, we're -- I'd put it sort of a newer category. I mean, we continue to like social mobile as a key theme. In particular, we love peer-to-peer models. We love network affect business models. And again, I think as you look at the highest priorities for us right now in terms of late stage premier VC-backed private companies, those would be categories, but companies that we're tracking, areas that we're tracking that we think are going to be huge. Blockchain, everybody is talking about crypto currency and so forth. And that's interesting, obviously, there's been a lot of activity there. But I think the blockchain broader as really the next computing platform and how it affects not just currency and the financial services world, but how it affects real estate, and healthcare and education and everything else. We think that's pretty significant. Education theme, which has been a major theme of ours. We just had our conference. We had companies in the portfolio that are -- arguably Coursera's created the world's leading learning platform with over 30 million students on it. Coursera is a business that you haven't heard as much about, but it's growing very fast. And you've got incredibly impressive characteristics, in terms of financial generating, cash generating characteristics. So we're really bullish with that. The AR/VR theme is something that continuously intrigues us, but it also is something that it still feels like it's waiting to really pop in terms of being commercially taking off. I mean you saw the recent Facebook developers' conference was a, oculus, was the price, bought down dramatically. You see, it's going to happen, it's going to be transformative, and we continue to kind of focus on what are the key platform and technologies, names, that can be significant in that space. And an overarching play, which is I think, it's almost like saying, the Internet or area is AI. And AI, and data analytics, everything is a powerful software that you see that allows you to have real-time information and predictive capabilities. What's going on with AI in many industries with platform companies is a big, is a huge, huge deal. And in terms of the focus on things that we're doing and some of the ways that we're trying to identify the companies that we think are going to be the leading companies in that space, we are very active with that. And again, I think, that's probably my quick summary of areas that we think are what are the most fertile opportunities for the leading growth companies there.

[Operator Instructions] We'll take our next question from [Owen Levy] with Wells Fargo.

So given the concentration of the top assets in the portfolio, obviously, crystallizing the value there is critical. There's a slight bump from Q4 to Q1, with Palantir. Recently in April, I think Bloomberg BusinessWeek had a hit piece on them. And we've seen data analytics firms face some headwinds, obviously, with [indiscernible] getting dragged in front of Congress. Have you seen any recent secondary market transactions and what the share price has been valued? Just make us feel good that, that we're still not going to take a huge marked down there. And obviously, with Spotify, there's no 180-day lockup. Is there a specific price target or catalyst that you're waiting for to exit that position?

Thanks, Owen. Appreciate the questions. First on Palantir. I mean, we have very rigorous, robust valuation process that we go through here on a quarterly basis, that's both internal and have an outside valuation firm, Andersen. And one of the key determinants of course, is were there secondary trades and what those prices are. I will say, and I -- I'm going to be careful, become I'm not sure how public it is. But I will say that in terms of our comfort level, where about Palantair's stock is trading, it's driven by a process we're also aware of buying that's going on at [indiscernible]. It's higher, but it's just a function of how the formula works. I mean, I'd say higher, not meaning $0.02 higher. I don't know Bill, if you want to add to that, I'll come back on the ...

In particular, I would say, Palantir, there tends to be -- when we look at our -- when you look at our marks for Palantir, what I would say is that in each quarter, there is generally a very large or significant component of the value that's attributable to secondary transactions. Within the private markets, there are a number of names that have a lot of activity, consistently in terms of the dollar value of trades that are done as well as numerous trades. And I would say, Palantir, for the last number of quarters has had significant amount of activity for which we've been able to utilize and use for the marks in our portfolio. So I think, when you're looking at where we have Palantir marked, that is pretty consistent with what you're seeing, the weighted average transactions taking place in the quarters.

Yes. As it relates to Spotify, we're actively monitoring that we appreciate that people can buy Spotify in the open market on their own. We do believe that it's in our shareholders' interest and within the parameters of what we have given as guidance in terms of when we would look to monetize the position. We do still believe $150 per share -- while we made over 200% gain in our investment in Spotify. We do believe that there is material upside from here based on the fundamentals versus the comps in the growth rate is a predictability. And we think catalyst, which one of which, we mentioned in the call, which is gross margins. We've seen gross margin go from the teens to 25%. And as Spotify continues to be the leader in this category and really disrupting the music industry, the leverage it has continues to grow. So we see a business with high-reoccurring revenue. I mean, I can think of another freemium business, where nearly 50% of the people on the platform pay for it. We have a free option. The churn is almost nonexistent. Growth rate's high and expanding gross margins. And on a price of sales basis, compared to Netflix you could see a stock that was double. If it' just trade like -- now I'm not going to say it's going to -- Netflix is a higher gross margins and has been out there for a while and so forth. But if you just adapt now. And so we're staying close to it, obviously, we want to protect and be careful with this position. But if we do believe the risk/reward is compelling enough that we would like to continue to ride this for a bit.

[Operator Instructions] And it looks we do have a follow-up from [Owen Levy].

In the response, I just want to clarify on Palantir in the secondary market. Since that Bloomberg hit piece and Zuckerberg and Congress and all the data analytics issues, you haven't seen that the transaction share price just fall off the cliff. It's been relatively stable. I just want to clarify that one point.

I was going to say, through the first quarter, no, there has been no change. As it relates to this quarter, I actually haven't seen the data or haven't looked at the data for the secondary transactions that have taken place here in the second quarter. The one thing I would say about Palantir and Michael can opine on this, but Palantir is generally called in many of times to help governments. And things of that nature, and so they're used by a lot of departments within the U.S. government and you can see that with the contracts that have been announced as well as the European Union and so I think Palantir has been very resourceful in helping, sorting through all the data traffic that exists on the Internet to help these agencies detect information that might be detrimental to us as a society. And so again, I think from that standpoint, Palantir has been very, very useful to a lot of the government agencies across the world.

That does conclude today's question-and-answer session. At this time, I will return the conference back to Mr. Michael Moe for any closing remarks.

Yes. Thank you. Again, appreciate you tuning in for this quarter's call. We're very excited about how our portfolio's positioned. We would again, encourage you if you can to either come to our Investor Day May 30, from 1 p.m. to 5 p.m. in Silicon Valley, or tune into the live streaming. But we look forward to hearing any follow-up questions and being able to talk to you again next quarter. Thanks, everybody.

This does conclude today's conference. Thank you for your participation. You may now disconnect.