Facebook Faceplant

GSV Capital Rides Facebook to the Top, Promptly ‘Punished’ on the Way Back Down

Betting on Zynga and Groupon didn't help, either.
 GSV Capital Rides Facebook to the Top, Promptly Punished on the Way Back Down

Meanwhile, in Zucklandia…

Today, in Facebook hangovers: GSV Capital, a firm that got a big boost from its 2011 investment in the company. The New York Times reports GSV is now taking its lumps, thanks to that very same investment.

As Social Network star Justin Timberlake once put it: What goes around, comes around (comes around, comes around).

When the company bought a stake back in June 2011, the development was greeted with nothing short of feverish excitement. That’s because GSV is a closed-end mutual fund, which allow average Joe investors to get their hands on shares in private companies–indirectly, that is. (As the Times explains, “Closed-end funds like GSV typically sell a set number of shares, and their managers invest the proceeds.”) With folks clamoring for Facebook and unable to get it, many settled for shares of GSV, pushing the stock up 42 percent in a single day of trading.

Here’s what the Wall Street Journal had to say at the time:

The incident underscores the mounting frenzy around Facebook, which may go public as soon as next year. Since Goldman Sachs invested in the social network in January at a $50 billion valuation, investors have scrambled to find any way possible into the stock—even indirectly through small investment vehicles such as GSV.

Ah, the halcyon days of summer 2011. Everyone’s future riches seemed so assured!

Things have changed, however. The structure of a closed-end mutual fund means the stock only does well if investors like the portfolio, and GSV’s once savvy-looking startup-studded strategy is suddenly out of fashion. The Times says that shares of GSV are now trading at $8.54, as opposed to a one-time average of $15.35. And it sounds like that’s inspiring gloom around the office:

“We probably benefited from our stake in Facebook more than we deserved on the way up,” said GSV’s chief executive, Michael T. Moe, “and were certainly punished more than we deserved on the way down.”

It probably didn’t help they took some of the money made on Facebook and plowed it into–we cringe to even type it–Groupon and Zynga. Welcome to the winter of your discontent, gentlemen.

Worst of all, though: In the lede, the great Internet explosion has been downgraded to a mere “boomlet.” Is it already time for adjectival retrenchment?

Follow Kelly Faircloth on Twitter or via RSS. kfaircloth@observer.com