| Funds with Facebook hammered as proxy for shorts May 22nd 2012, 19:31  By Ross Kerber | Reuters – 30 mins ago (Reuters) - Some of Facebook Inc's good friends have suffered in its rocky initial public offering. Firsthand Technology Value Fund and GSV Capital Corp, two closed-end funds that bought shares of the social media company before its IPO, have been pummeled, used as proxies for betting against Facebook. "Until investors can actually short Facebook, they have to keep shorting things that can give them some sort of proxy for Facebook," said Thomas Vandeventer, manager of the Tocqueville Opportunity Fund, which owns shares in both closed-end funds. Firsthand is down 26 percent in the three trading days since Facebook went public. GSV has lost 27 percent. Managers of both funds were not immediately available for comment. So soon after Facebook's IPO, it is hard for investors to borrow shares of the company to sell short. Traditional mutual funds that own Facebook cannot be shorted. Under securities rules, both Firsthand and GSV are "business development companies," a designation that allows them to invest like venture-capital funds while taking money from public investors and trading on an exchange like other closed-end funds. As a result, they can serve as tools for short-sellers. Some shorters sprang into action even before the Facebook IPO. The number of GSV shares sold short soared to 1.56 million as of April 30, the most recent figure available, from just 103,280 at December 30, Nasdaq data show. Short shares of Firsthand jumped to 29,588 from 300 over the same period. The sell-off in Firsthand and GSV is out of proportion with the funds' holdings of Facebook shares, which were priced at $38 in the IPO and have since lost 17 percent. Firsthand owned 600,000 pre-IPO Facebook shares acquired at an average cost of $31.50 per share, or $19 million, the fund said in a press release on Monday. At Tuesday's Facebook share price, the stake was worth almost exactly that -- or about 9 percent of the fund's estimated gross assets. GSV owned $11.2 million worth of Facebook shares, or 9 percent of its total investments of $121.2 million, as of May 4, the fund said in a securities filing. Vandeventer noted that the Firsthand fund was trading under $20 while it had cash of $19.93 a share. "Basically, you could buy Facebook for free," he said. (Reporting By Ross Kerber; editing by Aaron Pressman) 
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