#124: Don Chambers - Update On SVVC Activism

Had the pleasure of bringing back on Don Chambers who is currently
involved in an activist campaign against SVVC. To see the first
episode where he discusses his ongoing battle with SVVC, you can
click here.   You watch this as a video on YouTube, click
here.   Show Links

BDC Info

Don's Proposal to SVVC (see page 16)

Election Results

    Don's Proposal  

PROPOSAL THREE (Non-Binding Stockholder Proposal) THAT THE BOARD
SEEK AND PURSUE ANY AND ALL MEASURES TO ENHANCE SHAREHOLDER VALUE


 


A stockholder, Donald Chambers, submitted the following
proposal for inclusion in the Company’s proxy materials. If the
stockholder, or a representative of the stockholder who is
qualified under state law, is present and properly submits the
proposal for a vote, then the proposal will be voted on at the
Annual Meeting. The Board of Directors unanimously recommends
that you vote AGAINST the proposal. The proposal and the
stockholder’s supporting statement, exactly as received from the
stockholder, are set forth below and are followed by the Board’s
explanation of its reasons for opposing the proposal. As an
advisory vote, if approved, the stockholder’s proposal would be a
non-binding recommendation to the Board of Directors. The Company
will provide Mr. Chambers’s address and number of shares held
promptly upon oral or written request.


 


STOCKHOLDER PROPOSAL


 


RESOLVED: That the shareholders of SVVC assembled at the
2020 annual meeting in person and by proxy, hereby request that
the Board of Directors of SVVC seek and pursue any and all
measures to enhance shareholder value including: (1) orderly
termination of the fund, (2) orderly liquidation of SVVC assets
with distribution of available cash to shareholders, (3) tender
offers for SVVC shares using available cash from any and all
investment exits, (4) merger of the fund into an entity offering
shareholder exits near NAV (net asset value), or (5) other
measures likely to allow shareholders to exit SVVC near its NAV.


 


REPRINTED SUPPORTING STATEMENT FROM STOCKHOLDER


 


I urge shareholders to vote “Yes” to this proposal for the
following reasons (based on information, belief and personal
computations):


The performance of SVVC’s stock has been catastrophic relative to
relevant benchmarks. The total annualized compounded market
returns of SVVC and three relevant benchmarks over the life of
SVVC are:


 


Ticker


Description


Annual Return 4/28/2001 -10/24/2019


VT1


Total stock market ETF


9.5%


VB


Small stocks ETF


8.0%


SPBDCUP


S&P BDC Index


6.3%


SVVC
 

-8.9%


 


Basing SVVC’s return on its recent NAV generates a positive
return (4.8%). But that highlights the crux of the problem:
SVVC’s NAV overstates its value under current management because
it does not fully account for prospective fees and expenses.
SVVC’s market price does reflect the massive fees and
indicates a loss of -8.8% per year. SVVC’s 2% annual management
fee (on gross assets) is roughly a 7% annual fee based on the
market value of the equity. SVVC’s most recent statement reports
$908,003 as the quarterly management fee (which is over 50 cents
per share annualized). There are additional expenses and a 20%
incentive fee on realized net profits. Accordingly, the discount
of SVVC’s market price to its NAV has been very large - recently
well over 50%.


 


The annual rate of compensation to each of the four independent
directors of SVVC is $50,000 per year yet, reportedly, only one
director held SVVC stock and that director held only 700 shares
(see SVVC Proxy Statement 5/30/19).


Assuming that SVVC’s valuations of its private investments are
reasonable, the Directors should be able to locate private equity
investors enabling SVVC to be liquidated at a value near to its
NAV.


 


Disclosure:


Mr. Chambers is a part-time employee (CIO-Model Portfolios) of
Biltmore Capital Advisors (BCA) which manages approximately
292,254 shares of SVVC on behalf of its clients. Mr. Chambers has
recused himself from all decisions at BCA regarding SVVC
transactions or voting while this proposal is under
consideration. SVVC is a restricted security for BCA employees so
Mr. Chambers is restricted from transacting in SVVC while this
proposal is under consideration. 


 
About Don Chambers

Donald R Chambers currently runs the
website, SaveFirstHandTechnology. He is also a
recently-retired (June 2017) professor of finance with 36 years
of teaching experience. Dr. Chambers has written several books
regarding investments and personal finance that are distinguished
by their clear writing and ability to make difficult concepts
accessible to his audience. He is the lead author of the 600+
page Modern Corporate Finance: Theory and
Practice which is in its eighth edition (forthcoming
with FlatWorld), the 1,000-page Alternative
Investments which is in its third edition with Wiley,
and several other books on finance. Dr. Chambers has
published over 50 scholarly articles.


​Dr. Chambers has had numerous appearances in media including
national television, national public radio, regional television,
and regional radio. Dr. Chambers co-starred in a
nationally-televised cable television series regarding finance in
1988 (45 Fortune) and frequently serves as a public speaker.


In more recent years, he has written numerous blogs and spoken
frequently regarding investments in his role as Chief Investment
Officer of Biltmore Capital Advisors.
  About Eric Schleien

Over the past decade, Eric has trained thousands of individuals
including board members of public companies as well as several
Fortune 500 CEOs. Eric specializes in organizational culture and
has become a leading authority on organizational culture in the
investment industry.


Eric has been investing for 15 years and has been using
breakthrough coaching methodologies for over a decade. Eric had
the insight to combine proven coaching methodologies with
shareholder activism techniques to create an entirely new model
for shareholder activism that was more reliable and created
greater sustainable results in a rapid period of time. On
average, Tribal Leadership produces a 3-5x increase in profits of
culturally troubled companies within an average of 24 months or
less.


Eric currently resides in Philadelphia, PA.


 
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