“Our portfolio continued to perform well during the third quarter, as evidenced by the net increase in unrealized appreciation on our investments of $5.1 million. We also paid a dividend of $0.24 per share in the third quarter, which brings our total 2013 dividends paid to $0.48 per share. Since our first distribution in 2011, we have now distributed a total of $0.64 per share to our stockholders.
We have completed the disposition of four portfolio company positions to date, with only one portfolio company disposition being at a loss ($121,000). The overall weighted-average internal rate of return on our four portfolio company dispositions has been 22%, calculated at the portfolio company level, before giving effect to our operating expenses (including any incentive fees).
In short, we believe that our pre-IPO investment strategy is working according to plan, and that our publicly traded stock provides investors with an opportunity to participate in a unique private-to-public valuation arbitrage strategy that is both diversified and executed with discipline,” stated Timothy J. Keating, CEO of Keating Capital, Inc.
Highlights for the Quarter Ended September 30, 2013
- $3.0 million investment in new portfolio company Deem, Inc. (“Deem”)
- Net increase in unrealized appreciation on investments of $5.1 million
- Increase in NAV of $0.14 per share resulting in an NAV of $7.93 per share as of September 30, 2013
- $0.24 per share special dividend paid in Q3; total dividends of $0.48 per share paid in 2013
- Last 12-month dividend yield of 6.9% based on $7.43 stock price as of September 30, 2013
- 136,886 shares of common stock repurchased for $0.9 million, an average price of $6.52 per share, or a 16% weighted-average discount to NAV
- Weighted-average portfolio company holding period of 1.7 years as of September 30, 2013
$3.0 Million Investment in New Portfolio Company Deem, Inc.
On September 19, 2013, Keating Capital completed a $3,000,000 investment in the Series AA-1 convertible preferred stock of Deem, Inc. (“Deem”). Deem operates an e-commerce network that connects a large and diverse ecosystem of consumers, businesses, channel partners and merchants.
As of September 30, 2013, the net unrealized appreciation of Keating Capital’s portfolio was $6,472,018, consisting of: (i) 11 portfolio company investments with aggregate unrealized appreciation of $14,035,343, and (ii) six portfolio company investments with aggregate unrealized depreciation of $7,563,325. The unrealized appreciation (depreciation) of each of Keating Capital’s portfolio companies as of September 30, 2013, is set forth in the table below.
|As of September 30, 2013|
|Tremor Video, Inc.||4,000,001||4,984,192||984,191|
|Harvest Power, Inc.||2,499,999||3,480,000||980,001|
|Glam Media, Inc.||4,999,999||5,750,000||750,001|
|MBA Polymers, Inc.||2,000,000||1,180,000||(820,000||)|
|BrightSource Energy, Inc.||3,046,644||1,809,513||(1,237,131||)|
Weighted-Average Holding Period of 1.7 Years
As of September 30, 2013, the weighted-average holding period of Keating Capital’s 17 portfolio companies was 1.7 years.
Stock Repurchase Program
During the third quarter, the Company repurchased 136,886 shares of its common stock for approximately $0.9 million, or an average price of $6.52 per share. The shares repurchased in the third quarter were made at a 16% weighted-average discount to NAV per share.
Since the inception of the stock repurchase program in May 2012, the Company has repurchased 448,441 shares of its common stock for approximately $3.0 million, or an average price of $6.61 per share. The total shares repurchased under the program since inception represented approximately 4.8% of the outstanding shares at the time the Company commenced the stock repurchase program. The weighted-average discount to NAV for all repurchased shares was 17%.
On October 24, 2013, our Board of Directors discontinued the stock repurchase program in order to make additional capital available for potential new investment opportunities. No repurchases were made under the stock repurchase program after September 30, 2013.
Results of Operations and Balance Sheet
Increase in Net Asset Value during the Third Quarter
As of September 30, 2013, the total fair value of Keating Capital’s 17 portfolio company investments was $62.0 million. The Company also had cash and cash equivalents of $10.4 million, or $1.18 per share. The Company’s net assets at September 30, 2013 were $70.0 million.
As of September 30, 2013, the Company’s NAV was $7.93 per share—an increase of $0.14 per share from the second quarter NAV of $7.79. The components that typically drive the changes in NAV each quarter are: (i) net investment losses, effectively the Company’s operating expenses, (ii) realized gains/losses on portfolio company dispositions, (iii) the change in unrealized appreciation/depreciation on portfolio company investments, and (iv) distributions paid to stockholders or capital transactions. During the three months ended September 30, 2013:
The Company had net investment loss—effectively the Company’s
operating expenses (including base management fees and accrued
incentive fees)—of approximately $1.9 million, or a loss of $0.22 per
share. The Company’s operating expenses, excluding base management
fees and accrued incentive fees, were approximately $582,000 in the
third quarter. During the third quarter, the Company recorded
incentive fee expense of approximately $1.0 million resulting from an
increase in net unrealized appreciation of approximately $5.1 million
during the third quarter.
As of September 30, 2013, the Company had approximately $2.2 million of accrued incentive fees related to net unrealized appreciation and cumulative net realized gain on its investments. However, as of September 30, 2013, the Company’s investment adviser would not be entitled to payment of an incentive fee until after the Company has achieved cumulative net realized gains on its investments in excess of approximately $7.6 million, which represents the sum of each portfolio company investment with unrealized depreciation as of September 30, 2013. As of September 30, 2013, the Company had approximately $4.7 million of cumulative net realized gains, resulting from the sale of its positions in NeoPhotonics, Solazyme, LifeLock and Corsair.
- The Company had no realized gains or losses during the quarter since it did not dispose of any portfolio company positions during the quarter.
The Company had a net increase in unrealized appreciation on its
portfolio company investments of approximately $5.1 million, or an
increase of $0.57 per share, as a result of the following:
- Write-ups during the quarter of approximately $6.2 million in 12 portfolio companies.
- Write-downs during the quarter of approximately $1.1 million in three portfolio companies.
- The Company’s NAV increased by $0.02 per share as a result of its share repurchases, which was increased by $0.01 per share to a total of $0.03 per share to reconcile the change in net asset value per share to the other per share information presented. This increase was offset by the dividend of $0.24 per share paid in September.
The following table details the change in net asset value for the quarter ended September 30, 2013.
|Keating Capital, Inc.|
|Change in Net Asset Value|
|Three Months Ended|
|September 30, 2013|
|Net Asset Value, Beginning of Period2||$||69,908,801||$||7.79|
|Net Investment Loss||(1,946,234||)||(0.22||)|
|Net Change in Unrealized Appreciation (Depreciation) on Investments:|
|Glam Media, Inc.||320,000||0.04|
|Tremor Video, Inc.||124,208||0.02|
|BrightSource Energy, Inc.||170,000||0.02|
|Harvest Power, Inc.||110,000||0.01|
|MBA Polymers, Inc.||(160,000||)||(0.02||)|
|Net Change in Unrealized Appreciation (Depreciation) on Investments:||5,094,208||0.57|
|Net Increase in Net Assets Resulting from Operations||3,147,974||0.35|
|Stockholder distributions paid from net realized gains||(2,131,961||)||(0.24||)|
|Capital Stock Transactions:|
|Repurchases of Common Stock3||(892,853||)||0.03|
|Net Asset Value, End of Period2||$||70,031,961||$||7.93|
|Weighted Average Common Shares Outstanding During Period||8,932,438|
|Common Shares Outstanding At End of Period||8,835,340|
|* Per share amounts less than $0.01.|
|1Unless otherwise indicated, per share data based on weighted average common shares outstanding during the period.|
|2Per share data based on total common shares outstanding at the beginning and end of the corresponding period.|
|3The increase in net asset value per share attributable to repurchases of common stock for the three months ended September 30, 2013 was $0.02 per share. However, for purposes of this presentation, the per share amount attributable to purchases of common stock was increased by $0.01 per share to a total of $0.03 per share to reconcile the change in net asset value per share to the other per share information presented.|
Since 2011, the Company has made four distributions to stockholders totaling $0.64 per share as follows:
|Date Declared||Record Date||Payment Date||
|February 11, 2011||February 15, 2011||February 17, 2011||$ 0.13||Return of Capital1|
|December 6, 2012||December 14, 2012||December 26, 2012||0.03||Capital Gains|
|May 28, 2013||June 14, 2013||June 26, 2013||0.24||Capital Gains2|
|May 28, 2013||September 13, 2013||September 25, 2013||0.24||Capital Gains2|
|1The February 2011 distribution was a special cash distribution based on the unrealized appreciation we had recorded on our NeoPhotonics investment at the time of the distribution, following NeoPhotonics’ completion of its IPO. In the future, we do not expect to pay distributions based on the unrealized appreciation of our private or public company investments.|
|2The determination of the tax attributes of the June and September 2013 dividends will be made as of the end of 2013 based upon our net realized gains for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of our June and September 2013 dividends for a full year. If we had determined the tax attributes of our June and September 2013 dividends as of September 30, 2013, all of such dividend would be from long-term capital gains.|
As of September 30, 2013, the dividend yield on the Company’s common stock for the 12 months ended September 30, 2013 was 6.9%, which is calculated as the total dividends declared by the Company during such period divided by the $7.43 per share closing stock price as of September 30, 2013.
As of September 30, 2013, the Company had 8,835,340 shares of common stock issued and outstanding. There are no options, warrants, or other classes of securities issued or outstanding. Additionally, the Company had no debt for borrowed money as of September 30, 2013.
The following are attached to this press release:
- Keating Capital’s statement of assets and liabilities as of September 30, 2013 and December 31, 2012, and
- Keating Capital’s statement of operations for the three months ended September 30, 2013 and 2012.
Keating Capital invites stockholders, analysts and interested parties to attend our earnings call on October 29, 2013, at 4:00 p.m. Eastern time. You may pre-register at http://info.keatingcapital.com/Q32013EarningsCallRegistration.html, and participate in the call by dialing (800) 954-0598.
A slide presentation will accompany the earnings call and will be available on October 28, 2013 at http://ir.keatingcapital.com/events.cfm. Select the Q3 2013 Earnings Call Slides link to download and print the presentation.
An archived audio replay of the earnings call together with the slide presentation will be available within approximately three hours after completion of the call at http://ir.keatingcapital.com/events.cfm. This archived recording will be available until the Company’s next quarterly conference call which has been tentatively scheduled for February 25, 2014, following the filing of its Q4 2013 results.
About Keating Capital, Inc.
Keating Capital (www.KeatingCapital.com) is a closed-end fund (regulated as a business development company under the Investment Company Act of 1940) that specializes in making pre-IPO investments in emerging growth companies that are committed to and capable of becoming public. We provide investors with the ability to participate in a unique fund that allows our stockholders to share in the potential value accretion that we believe typically occurs once a company transforms from private to public status. Keating Capital’s shares are listed on Nasdaq under the ticker symbol “KIPO.”
This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect Keating Capital’s current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release, including the factors set forth in “Risk Factors” set forth in Keating Capital’s Form 10-K and Form 10-Q filed with the Securities and Exchange Commission (“SEC”), and subsequent filings with the SEC. Please refer to Keating Capital’s SEC filings for a more detailed discussion of the risks and uncertainties associated with its business, including but not limited to the risks and uncertainties associated with investing in micro- and small-cap companies. Except as required by the federal securities laws, Keating Capital undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. The reference to Keating Capital’s website has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release.
|Keating Capital, Inc.|
|Statements of Assets and Liabilities|
|Investments in portfolio company securities at fair value:|
|Private portfolio companies|
|(Cost: $47,490,353 and $47,332,174, respectively)||$||52,118,180||$||46,819,998|
|Publicly-traded portfolio companies|
|(Cost: $4,000,001 and $6,505,162, respectively)||4,984,192||8,073,708|
|Private portfolio companies|
|(Cost: $4,000,000 and $8,000,080, respectively)||4,860,000||10,130,000|
|Total, investments in portfolio company securities at fair value||61,962,372||65,023,706|
|(Cost: $55,490,354 and $61,837,416, respectively)|
|Cash and cash equivalents||10,433,449||8,934,036|
|Prepaid expenses and other assets||78,974||104,429|
|Deferred offering costs||17,177||322,906|
|Base management fees payable to investment adviser||$||116,242||$||128,746|
|Accrued incentive fees payable to investment adviser||2,230,880||693,699|
|Administrative expenses payable to investment adviser||52,880||51,396|
|Accrued expenses and other liabilities||1,300||8,157|
|Common stock, $0.001 par value; 200,000,000 authorized; 9,283,781 and|
|9,283,781 shares issued, respectively||$||9,284||$||9,284|
|Additional paid-in capital||71,675,244||71,675,244|
|Treasury stock, at cost, 448,441 and 108,996 shares held, respectively||(2,962,594||)||(764,179||)|
|Accumulated net investment loss||(5,266,063||)||(693,699||)|
|Accumulated undistributed net realized gain on investments||104,072||-|
|Net unrealized appreciation on investments||6,472,018||3,186,290|
|Total net assets||$||70,031,961||$||73,412,940|
|Total liabilities and net assets||$||72,491,972||$||74,385,077|
|Net asset value per share (on 8,835,340 and 9,174,785 shares|
|Keating Capital, Inc.|
|Statements of Operations|
|Three Months Ended|
|September 30,||September 30,|
|Interest from portfolio company investments|
|Total interest income from portfolio company investments||11,613||-|
|Interest and dividends from cash and cash equivalents||820||537|
|Total investment income||12,433||537|
|Base management fees||358,247||383,061|
|Administrative expenses allocated from investment adviser||158,400||157,372|
|Legal and professional fees||45,263||72,395|
|Stock transfer agent fees||14,498||17,934|
|Public and investor relations expenses||2,510||31,657|
|Marketing and advertising expenses||199,800||4,883|
|Printing and production expenses||12,297||18,461|
|Postage and fulfillment expenses||5,555||12,984|
|General and administrative expenses||86,357||82,801|
|Total operating expenses||1,958,667||1,083,052|
|Net investment loss||(1,946,234||)||(1,082,515||)|
|Net realized gain (loss) on investments|
|Total net realized gain on investments||-||(121,428||)|
|Net change in unrealized appreciation (depreciation) on investments|
|Total net change in unrealized appreciation (depreciation)|
|Net increase (decrease) in net assets resulting from operations||$||3,147,974||$||128,070|
|Net investment loss per common share outstanding (basic and diluted)||$||(0.22||)||$||(0.12||)|
|Net increase (decrease) in net assets resulting from operations per|
|common share outstanding (basic and diluted)||$||0.35||$||0.01|
|Weighted average common shares outstanding (basic and diluted)||8,932,438||9,237,502|