The GSVC Gameplan...
GSVC did nothing wrong in offering shares, the company only did what they promised. The plan is to use money raised from stock to invest in growing pre-IPO companies, then eventually sell their stakes and give out 90% of the proceeds in the form of dividends. They have always said that they would offer shares every 6-12 months if needed for future investments. When they sell they currently have to disburse 90% as a dividend if they want to keep their tax status. If you read the statements you would know this.
Currently they can sell their Groupon stake on May 1st, or sometime close to that. So if the shares have appreciated, then they may sell some and and give out a healthy dividend. If this happens around the time Facebook goes public, just imagine the hype that this stock will see. As far as I can tell they could eventually stop gaining capital from share offerings, but to do this they would have to reinvest money from the selling of shares, instead of giving a dividend. This would change their tax status though and therefore may not help as much as one would think.
Currently, this is the plan... raise capital by selling shares, then buy into companies, sell the stakes, give a large dividend, then repeat. The managers are paid a 2% fee, much like you would see into private equity or hedge fund investments. This is the way the company works. If you want to ride this to the top, you either need to sell prior to each possible share offering then buy back, or just stick it out in spite of the short term drops in share price. If you believe in the company's strategy, then either way should work out long term.
Moe is not out to scam anyone. He has a reputation in the industry and connections with very important people in silicon valley. I really doubt he is willing to risk that respect. My thought is that he is hoping that through GSVC he can establish himself as the next Warren Buffett, and solidify his reputation as one of the best growth stock pickers in history. Also there are many important people on their board who would not risk their reputations either. This is also a company with an actual product, not some empty scam. If you were surprised by the share offering, that is your fault for not learning about the company you are investing in. Longterm, GSVC should be a retirement maker.
