Q4 2023 SuRo Capital Corp Earnings Call

Participants

Jackson Stone; Investments; SuRo Capital Corp

Mark Klein; Chairman, President and Chief Executive Officer; SuRo Capital Corp

Allison Green; Chief Financial Officer, Treasurer and Corporate Secretary; SuRo Capital Corp

Presentation

Operator

Hello, and welcome to Ferro Capital's Fourth Quarter and Fiscal Year 2023 earnings call. My name is Melissa, and I will be your coordinator for today's event. Please note this conference is being recorded (Operator Instructions) and you'll be connected to an operator, I'll turn the call over to Jackson stone. Please go ahead.

Jackson Stone

Thank you for joining us on today's call. I'm joined today by the Chairman and Chief Executive Officer of SuRo Capital, Mark Klein; and Chief Financial Officer, Allison Green. Please note that a slide presentation corresponding to today's prepared remarks by management is available on our website at w. w. w. dot zero cap.com under Investor Relations Events and Presentations.
Today's call is being recorded and broadcast live on our web on our website, www.ferro.com replay information included in our press release issued today. This call is the property of SuRo Capital and the unauthorized reproduction of this call in any form is strictly prohibited. I would also like to call your attention to the 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, including the impact of any market volatility that may be detrimental to our business and our portfolio companies, our industry and the global economy that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward looking.
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 SuRo Capital's latest SEC filings, please visit our website at www.circor.com or the SEC's website at SEC.gov. Now I'd like to turn the call over to Mark Klein.

Mark Klein

Thank you, Jackson, and good afternoon, and thank you for joining us today. We would like to share the results of SuRo Capital's Fourth Quarter and Fiscal Year 2023. In 2023, there was geopolitical conflict, including two ongoing wars, a rapid rise in interest rates and a volatile stock market led higher by a handful of companies known as a magnificent seven. These mega cap stocks drove major market indices to significant gains in 2023.
On the other hand, private markets remained weak. According to PitchBook 2023. Venture deal volume declined 30% from 2022 and 51% from 2021 valuations also declined. Florida's Private Market Index, which tracks the valuations of late-stage venture-backed private companies close the fourth quarter, down approximately 5% and down for approximately 20% for the year. As we have discussed for several quarters, we feel the valuations of public markets and private markets are converging.
We believe the current environment is now delivering the high quality opportunities we had been awaiting. As such, we executed three investments during the fourth quarter in 2023. As a whole, we made investments totaling approximately $26 million with over 70% of that capital deployed into secondary opportunities at significant discounts to their last primary valuation. Additionally, subsequent to year end, we invested $10 million in supplying demands. Otherwise no wise known as liquid depth primary financing, as I will discuss shortly in my remarks.
Turning to our fourth quarter results. We ended the year with a net asset value of $203.4 million or $7.99 per share. This NAV compares to a net asset value of $7.39 a share at year end 2022.
Please turn to Slide 4. Turning to our top five positions, I first want to highlight our cash position. As of year end, our cash and short term US Treasuries available for investments for approximately $92 million, representing 32% of our gross assets. Suro Capital's top five investments as of December 31st were learning's storm winds service, Titan, Blink Health and locus robotics. These positions accounted for approximately 56% of the investment portfolio at fair value. Additionally, as of December 31st, our top 10 positions accounted for approximately 80% of the investments portfolio.
Next, I would like to provide further detail on our recent investors. During the fourth quarter, we made a $2.7 million follow-on secondary investment in forecasts of $325,000, follow-on investment in X point as part of the SuRo Capital sports portfolio and a $1.6 million investment in the sponsor economics of Columbia Acquisition Corp two, please turn to slide 5. I would like to provide further detail on our investment in the sponsor economics of Columbia to the management team.
Most recently had success with our portfolio company, Columbia Acquisition Corp. one, which merged with public square and began trading on the New York Stock Exchange in Q3 of 2023. As previously discussed, we made a $2.7 million investment in the sponsor economics of Colombia first. And as of the end of the year, we value our position in Publix at nearly four times our initial investment. Given the success of Columbia one, we excite, we are excited about the prospect of management executing on another compelling opportunity for its second sub.
Please turn to Slide 6. Subsequent to year end, we made a $10 million primary investment in liquid debt, a CPG. brand focused on still water, sparkling water and teas. Our investment was part of the Company's Series F one financing round, a $67 million financing completed at a $1.4 billion valuation the round included all major existing investors, strategic partners such as top national distributors and notable names in entertainment and sports. Since its launch, the company has significantly expanded its footprint to over 100, 13,000 retail doors in the U.S. and U.K. and is introduced new school skews in sparkling water, flavored sparkling water, ice tea and powdered hydration mixes.
The management team is composed of advertising and beverage industry veterans, including the former head of sales of White Claw former head of seven 11 ventures and the former head of supply chain for GT.s, Kombucha liquid Kombucha liquid debt is sold in the largest grocery stores chains in the U.S., such as Walmart Target, Kroger, Whole Foods and Albertsons, as well as many of the largest convenience store chains such as seven 11.
In 2023, the company achieved over $260 million in scan sales, which equates to triple digit growth for the third consecutive year according to SPINS data, this makes liquid def, fastest-growing water and Ice Tea brand ever as the Company continues to grow. Their marketing strategy is centered around it's almost $8 million Instagram and TikTok followers making liquid death, the third largest beverage brand, followed on social Liquidnet plans to utilize the funds from this capital raise to further scale and optimize distribution, expanded cements retail presence and invest and product innovation.
As we previously discussed, we believe our cash position in this environment advantageously positions us to continue seeking out new opportunity as we near the end of the first quarter of 2024. We are pleased to share that we not only executed our investment in liquid debt, but we also anticipate closing two sizable exciting investments by the end of the quarter.
These two pending investments totaled $25 million. In aggregate, they are both high-growth institutionally backed businesses, one of which operates in the artificial intelligence intelligence industry and the other productivity software. As with any deals, there is no guarantee that either one of these transactions will close transitioning to our public investments. As previously stated, it is our objective to sell our public positions when lockup restrictions expire and there is relative stability in a given public position trading in line with this approach. We continue to monetize several of our public unrestricted positions over the course of the quarter.
During the fourth quarter, we fully exited our position in new Lake Capital Partners and reduced our positions in forge next store and public square one since year end, we fully exited our remaining position in store and further reduced our position in publics where warrants I would also like to reiterate SuRo Capital's commitment to initiatives to enhance shareholder value. As such, given the discount our stock is trading at compared to net asset value per share. We believe our active share repurchase program and recently commenced a modified Dutch auction tender offer to be efficient and accretive deployments of capital.
Allison will speak more about our share repurchase program a modified Dutch auction tender offer later in this call. Given read its impending IPO, coupled with the reports of several other potential high-profile IPOs, we believe the IPO market may begin to reopen with our existing portfolio as well as the investments we have in process. Coupled with our remaining capital, we believe our portfolio is well positioned to create value for our shareholders. Thank you for your attention. And with that, I will hand it over to Alison Green, our Chief Financial Officer.

Allison Green

Thank you, Mark. I would like to follow Mark's update with a more detailed review of our fourth quarter and financial results as of December 31st, including our investment activity portfolio, company monetizations, current liquidity and the status of our share repurchase program and current modified Dutch auction tender offer.
First, I will review our investment activity. During the fourth quarter, we invested a total of $4.6 million in new and follow-on investments. These include a $1.6 million investment in the sponsor economics, the Columbia Acquisition Corp. two for which we receive Class B and Class W. units at $2.7 million follow-on secondary investment in four types common shares, bringing our total investment import heights in 2023 to $8.5 million and a $345,000 follow-on investment to SuRo Capital sports and exports convertible notes.
Over the course of the fourth quarter, we sold our remaining public common shares and Newmont Capital Partners and continue to monetize our public common shares in Forge and next door and warrants and public square. Notably, we sold 1,465,994 shares of forge for approximately $5.2 million in net proceeds, resulting in a realized gain of approximately $3.9 million. We also sold 303,963 warrants of public square for approximately $300,000 in net proceeds, resulting in a realized gain of approximately $200,000.
In addition to sales of our unrestricted publicly-traded investments. During the fourth quarter, we received the final payment of approximately $300,000 in proceeds from Second Avenue related to principal repayment and interest on the 15% term loan due 2020 December 2023. Additionally, we exited our position in Churchill sponsor six for a realized loss of approximately $200,000 after it was announced, it would not consummate a business combination and we would redeem its outstanding shares of Class A. common stock.
Finally, during the quarter, we received a distribution of approximately $115,000 related to our limited partner fund investment and true Global Ventures four plus. Additionally, subsequent to year end, we sold our remaining public common share the next door and continued to monetize our warrants and public square. As Mark mentioned, subsequent to year end through today, we completed a $10 million investment in liquid. That's Series S one preferred shares as it relates to our pending investments.
Subsequent to year end, we are in the final stages of documentation on two investments totaling $25 million in aggregate and the normal course of business, SuRo Capital may enter into investment agreements under which it commits to make an investment in a portfolio company at some future date or over a specified period of time. We are frequently in negotiations with various private companies with respect to investments in such companies. Investments in private companies are generally subject to satisfaction of applicable closing conditions.
Please turn to slide 7. Segmented by six general investment themes. The top allocation of our investment portfolio at year end to education technology, representing approximately 38% of the investment portfolio at fair value marketplaces was the second largest category, representing approximately 20% of our portfolio. The financial technology and services category accounted for approximately 18% of our investment portfolio and approximately 17% of our portfolio is invested in cloud and big data companies. Social and mobile accounted for approximately 8% of the fair value of our portfolio and sustainability accounted for less than 1% of the fair value of our portfolio as of December 31st.
Please turn to slide 8. We are pleased to report that we ended the fourth quarter and fiscal year 2023 with an NAV per share of $7.99, which is consistent with our financial reporting. The decrease in NAV per share from $8.41 at the end of Q3 was primarily driven by a $0.36 per share decrease resulting from unrealized depreciation of our portfolio investments during the quarter, in addition to an $0.11 per share decrease due to net investment loss and a $0.06 per share decrease due to the impact of stock-based compensation the decrease in NAV per share was partially offset by a $0.1 per share increase due to net realized gains on our investments during the quarter. At December 31st, 2023, there were 25,445,805 shares of the company's common stock outstanding. Presently, there are 25,353,284 shares of the company's common stock outstanding.
Regarding SuRo Capital's liquidity position as of December 31st, we ended the quarter with approximately $99 million of liquid assets, including approximately $28.2 million in cash, $53.8 million in short-term U.S. treasuries, and approximately $7 million in unrestricted public securities. The approximately $7 million of unrestricted public securities held as of year end represent our shares in force next door and SkillSoft and our warrants in public square, our common shares and public Squaire remain restricted until July 19th, 2020.
For Please turn to Slide 9. As previously discussed, on August seventh, 2023, our Board of Directors authorized a $5 million expansion to the share repurchase program to $60 million and an extension of the share repurchase program through October 31st, 2024. During the year ended December 31st, 2023 under both the share repurchase program and the 2023 modified Dutch auction tender offer.
The Company repurchased $3.2 million shares of its common stock for approximately $14.2 million and have a remaining $20.7 million approved to deploy via the share repurchase program. Since the inception of the share purchase program in August 2017, we have repurchased a total of 6,018,501 shares of our common stock for a total deployment of approximately $39.3 million of the $60 million authorized by the Board.
That does not include repurchases under various tender offers during this time period, approximately $20.7 million remain authorized under the share purchase program currently set to expire on October 31st, 2024. As previously announced, on February 14th, 2024, the Company's Board of Directors authorized a modified Dutch auction tender offer to purchase up to 2 million shares of its common stock at a price per share, not less than $4 and not greater than $5 intends an increment using available cash. The tender offer commenced on February 20th, 2024 and will expire at 5 P.M. Eastern time on April first, 2024, unless extended, if the tender offer is fully subscribed.
The company will purchase 2 million shares or approximately 7.9% of the company's outstanding shares of its common stock. Any shares tendered may be withdrawn prior to expiration of the tender offer. Stockholders that do not wish to participate in the tender offer do not need to take any action based on the number of shares tendered and the prices specified by the tendering stockholders, the company will determine the lowest per share price that will enable it to acquire up to 2 million shares of its common stock.
All shares accepted in the tender offer will be purchased at the same price, even a tender to the lower price. The tender offer is not contingent upon any minimum number of shares being tendered. The tender offer is, however, subject to other conditions which are disclosed in the tender offer documents filed with the US Securities and Exchange Commission on February 20th, 2020.
For in the future, the Board of Directors may consider additional tender offers or other measures to enhance shareholder value based upon a variety of factors, including the market price of the Company's common stock and its net asset value. The Company's Board of Directors is not making any recommendation to stockholders as to whether to tender or refrain from tendering their shares into the tender offer.
Stockholders must decide how many shares they will tender, if any, and the price within the stated range at which they will offer their shares for purchase the information agent for the tender offer is D.F. King & Co. and the depository is Equity Trust Company LLC. The Offer to Purchase letter of transmittal and related documents have been mailed to registered holders and certain of our beneficial holders.
Beneficial holders may alternatively receive the offer to purchase and a communication to consult with their bank broker or custodian. If they wish to tender shares for questions and information, please contact the information agent at zero. At DF. King.com banks and brokers may call the information agent at two one two two six nine five five five zero and others may call the information agent toll-free at eight seven seven three six one seven nine seven two. Shareholders may also visit the SuRo Capital website at www.xerox.com.
For a list of frequently asked questions related to the tender offer. That concludes my comments. We would like to thank you for your interest and support of SuRo Capital.
Now I will turn the call over to the operator to start the Q&A session. Operator?

Question and Answer Session

Operator

(Operator Instructions) It does not appear we have any questions coming through. I'd like to turn it back over to your host for any closing comments.

Jackson Stone

So we at SuRo Capital thank you for spending the time with us this afternoon, and thank you for your ongoing support Thank you very much.

Operator

Thank you. That concludes today's conference. You may now.