180 Degree Capital Corp (TURN) 2020 Q2 法說會逐字稿

(technical difficulty) Second Quarter 2020 Financial Results Call. And we'll also discuss 2020 developments through the third quarter as well.

This is Daniel Wolfe President and Portfolio Manager of 180 Degree Capital. Kevin Rendino, our Chief Executive Officer and Portfolio Manager, and I, would like to welcome you to our call this morning. (Operator Instructions)

We'd like to remind participants that this call is being recorded and that we'll be referring to the slide deck that we have posted on our Investor Relations website at ir.180degreecapital.com under Financial Results.

Please turn to Slide 2 that contains our safe harbor statement.

This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking statements are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed herein.

Please see the company's filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the company's business that could affect 180's actual results. Except as otherwise required by Federal Securities Laws, 180 Degree Capital Corp. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

I would now like to turn the call over to Kevin.

Thanks, Daniel, and good morning. Let's slide with -- let's start with Slide 2. If I may, let's flip the table to where we are with regards to our stock, our balance sheet, specifically our cash and liquid securities.

As of the close of business last night, our share price closed at $1.89. We have $1.80 per share of gross cash liquid securities. Giving us full credit for that part of our balance sheet [subtracting] $0.05 of liability, the remaining per share value ascribed to our private portfolio was $4.5 million or $0.14 a share against a portfolio that is worth $1.30 per share or $40 million. That's an 11.2% effective market value per share on the private portfolio.

In other periods where we've done the math on this slide, we were at levels more like 50%. If we sold the portfolio today for $0.20 on the dollar, something we have zero intention of doing, our stock price would be higher. If we sold it for 50%, our share price will be well into the 2s. Just on milestone payments alone for our Petra sale were more than The Street is giving us credit for the entire portfolio.

AgBiome literally is worth 3x the value of the private portfolio is being priced.

I'd like to think that some of the parts return itself should lead to a higher share price than last sale as for now on for the quarter.

Next slide, please. We start on Slide 3 with a summary for the quarter, where our share price rose 28%. Our NAV climbed 27%. And our cash and liquid securities ended June with $44.6 million or $1.45 per share.

For the quarter, we generated a 24% return from our public portfolio led by Franchise Group, Alta, Lantronix and Quantum. We did have 2 positions that hurt in the quarter. Maven was hurt by the loss of sports advertising. Potbelly struggles, as its business like most restaurant companies came under duress due to the pandemic.

Finally, as we discussed a few weeks ago, we were the anchor investor in the recapitalization of Sonim Technologies at $0.75 per share.

On the private side, we generated a 30% return, led by the takeover of our private holding Petra Pharmaceutical. We also want to mandate this quarter to manage $25 million from a portion of publicly traded companies' pension account. We've already put some of that money to work, and we've achieved a nice return so far for the client.

While we're happy with our absolute return for the public holdings, although on a relative basis, the returns were mixed. There's been a significant dichotomy between those of value stocks versus those of gross stocks in the past quarter, as investors have been flocking to the scarcity names of those companies that are actually showing growth through the pandemic. I'll show you a slide highlighting the have/have-not market we are currently living through.

Finally, we're off to an incredible start on the public portfolio this quarter as we were up 11.7% through July and literally 25% through August 7 -- or I'm sorry, through last night.

Next slide, please. Slide 4 shows our NAV history. We had a significant snapback to the $2.70 per share from its $2.12 book value from the March quarter. If you kept our private portfolio flat this quarter, Q3, which is just an assumption, as of last night, our book value is materially higher as of the close, given our public portfolio stocks for the first 40 days of this quarter.

On Slide 5, this chart shows the stock price discount to our NAV. Despite the fact that we have fixed our balance sheet, generating more cash and liquid securities than at any point in the last 3.5 years, and despite the fact that we have shown 3 monetization events of our private portfolio that were done at levels greater than the NAV, those positions had before the monetization took place. We still traded only 65% of our book value.

Next slide. I think most of you know by now that we've spent the majority of our time focused on micro analysis for the companies we either own or are looking at. That said, we think about the macro each and every day. I wanted to point to a slide that accurately depicts the markets that we're living through.

We climbed the top right cell box for half a second. While we achieved a 24% gross total return, that was mixed relative to the Russell Microcap Index of 30% and the Russell Microcap Value Index of just 23% this quarter. I've never seen greater bifurcation of performance for the U.S. stock market. For example, as of the end of July, the Invesco QQQ Index, which tracks the Nasdaq 100, is up 26% year-to-date; while the Russell 2000, which tracks mid and small-cap stocks, is actually down 10.6%. The Russell 1000 Growth Index was up 18.3%, while our Russell 1000 Value Index is down 13%. We have seen the same discrepancy against the 2 indices we use to benchmark our own performance.

At the end of July 20, the Russell Microcap Growth Index is up 5.7%, while the Microcap Value Index is down 21.7%. The differing returns are staggering. I mentioned this to serve the factual information for you because, as you know, we play in the value sandbox of the market. While it is completely understandable that investors have gravitated towards those companies least impacted by COVID-19, essentially the large-growth companies. The valuation discrepancy has never been so extreme as shown in the below chart.

As value investors painfully lived through all-or-nothing tech bubble back in 2000, I've never thought I'd see a market like that again. As a matter of relative performance, the current period of Draconian outperformance by the QQQ Index has led to an even greater disparity of performance between growth and value than the tech bubble, and that's why a factor of 3.

As I said, I understand how we've gotten here given the meltdown of the economy. During periods like this, investors gravitate towards those companies showing growth. But I've also seen how it ends, when investors pour money into only a select few companies. If and when this economy moves down the path of sustained recovery, there'll be a huge catch-up trade for the type of companies we invest in.

Next slide, please. Our normal source of change in net assets for the quarter are on Slide 7. We start with the $2.12 NAV. We had $0.27 from our public holdings, $0.34 from our private holdings. We had $0.03 of normal operating expenses, and we ended up with a $2.70 NAV.

On Slide 8, it's the same chart but for the calendar year 2020 through June 30. A $0.24 hit from the public holdings, $0.08 hit from the private portfolio and $0.04 of expenses led to a 11.75% decline of our NAV through the first 6 months of the year.

On Slide 9, lastly, this is the same chart only highlighting the performance since 180 was born in January 2017. An impressive $0.94 of gains from our public holdings, offset by $0.14 of losses in -- from our private holdings and $0.38 of losses from expenses to run the business.

Slide 10 is the specific breakdown and performance of our holdings, led by good performances from Alta, Franchise Group and Lantronix, offset by performances, as we highlighted earlier, from TheMaven and Potbelly.

Let's dig into the specific names on Slide 11. On Slide 11, you see the names that helped. Franchise Group helped our NAV by $0.13, climbing 160% this quarter. The company provided a business update in May, [assuaged] investor fears that the company was either insolvent and/or at risk of bankruptcy. It provided better-than-expected guidance on revenues, EBITDA and non-GAAP earnings and it continued its quarterly dividend of $0.25 per share. We sold 121,537 shares during the quarter at an average price of $25.80, and the stock was up 12% through July 31, 2020.

Alta helped by $0.07 on an 82% move this quarter. Alta provided investors with a useful framework to understand the operating leverage in the company's business in the face of COVID-19-related impacts.

While business was impacted by stay-at-home orders, the lifting of those orders in the second quarter led to a quick recovery in certain markets, specifically the Florida construction-related business and slower but meaningful recovery for the rest of its businesses. Its warehouse businesses in Illinois was less impacted. Alta also announced and closed 2 acquisitions in the quarter, a logistics consulting company and a New York City-based focused dealership business.

On the next slide, you'll see Lantronix, which helped our NAV by $0.07. The company reported revenues for its fiscal year Q3 2020, despite supply chain and business disruptions due to the COVID-19 pandemic. And they reported record revenues for that quarter. They showed increasingly -- increasing strength in the company's remote connectivity solutions business. And they continue to add to the senior management team by hiring former Microsemi employees that worked with the CEO, Paul Pickle, when he was at Microsemi.

Quantum rose 31% in the quarter, which turns out to be a much more muted recovery than the other names we heard. The company renegotiated its covenants on outstanding debt that provided increasing -- increased operating flexibility and reduced investors' concern over default risk. Hyperscaler customers returned to purchasing, albeit not at the same rate as prior to the December '19 pause. Positives during the quarter were tempered by lower-than-expected guidance for calendar year quarter 2 due primarily to delays in purchasing by the media and entertainment customers.

On Slide 13, we see Maven. Our value is based on a VWAP of at least 1% of the outstanding shares traded and net of additional accrued partial liquidating damages of $276,000 that are due to us. The COVID pandemic and shut down sports reduced advertising spend and continues to materially impact Maven's business. We currently believe the advertising spend hit bottom mid-quarter 2 and is slowly recovering. A significant note, we joined TheMaven's Board as an observer during the quarter, and we have been spending a ton of time on this one as we believe, while, like most advertising companies it carries greater short-term risks than other companies in the pandemic. We also think Maven provide the most upside of anything we own.

Potbelly caused us $0.04 this quarter. In Q1, the company did an earnings call and gave the impression to investors that the company was headed for bankruptcy. It was a disorganized mess of a conference call. They then had to go back and attempt to clarify its operating position in a subsequent release and presentation.

We purchased additional shares from 180 and for our pension account and became the largest reporting shareholder of the company at a combined ownership of 8.6%. We filed a 13D on June 29, noting our ownership and the poor performance of the company under its CEO, while commending the actions of the Board to bring in restaurant experience onto the management team and the Board.

A couple of weeks later, Potbelly's Board hired a new CEO with deep restaurant experience, Robert Wright, who was the former COO at Wendy's. This, coupled with Steve Cirulis, who was hired from Panera, leads us to conclude that the business is now being run by a fine executive management team. We think our 13D filing helped.

On Slide 14, we show our performance on a year-to-date basis for each and every public company we have. Franchise Group, Mersana and Adesto lead the way on the upside; Potbelly, Alta and Synacor lead the way on the downside.

On Slide 15, this shows our stock [cooking] over the entirety of our history. Clearly, more winners than losers. And our significant wins like Adesto, The Street and Quantum follow very large significant starting positions on a percentage of assets.

On the next slide, I've said this before, you don't get everything right. And as I've said in the past, a successful investor will be right 2 out of 3 times. Just make sure the one time you're wrong doesn't outweigh the 2 times you're right. Fortunately for us, we limit our losses, and we've maximized the gains, as you can see on this chart.

On Slide 17, all in all, the preceding slide lead to this slide, our performance. As I've said, our public holdings performance was mixed this quarter, and we underperformed the Russell Microcap while outperforming Russell Microcap Value Index. We have a similar story year-to-date through June, beating one index and underperforming the other. Our 1, 3 inception numbers to date are also included in them and we're very proud of what we've done on that front, significant outperformance.

On Slide 18, we show this same slide each and every quarter and are making progress towards our eventual goal having all of our assets in cash and liquid securities. We have more than doubled our rate of cash and liquid securities from 27% when we first started to over half of our balance sheet today.

On Slide 19, we've highlighted this in my previous comments, but we're off to a roaring start this quarter. And here are some detail on that front. Our public portfolio is up 25% from the end of the quarter through last night. The Russell was up 10%, and the Russell Microcap Value Index is up 9%. Year-to-date, we are now up nearly 7%, which is almost unfathomable, given where we were at the end of the March, but we're happy and we'll take it. The largest increases in value have occurred from Potbelly, Quantum, Sonim, Lantronix and Franchise Group.

Daniel?

Thank you, Kevin. Please turn to Slides 20 and 21. As Kevin mentioned, during the quarter, we established a new core position in Sonim Technologies Inc., ticker symbol SONM. Sonim is a communications company that provides rugged cellular phones and accessories specifically designed for workers who are engaged in physically -- who are physically engaged in their environments and often in mission-critical roles. These workers are typically in industrial, public sector enterprises, operating across the construction, energy, utility, hospitality, logistics, manufacturing, public safety and transportation sectors.

We have known Sonim for a long time, having been introduced to the company when it was private considering a public listing. We passed on investing in the company multiple times, including in its IPO, primarily due to valuation concerns. We are true to our belief that the price we pay relative to the business we buy is the most important driver of investment returns.

Between May and September 2019, Sonim experienced technical and software issues with its devices, experienced significant carrier agreement delays and grossly mismanaged sales delivery timing. This resulted in significantly reduced revenue guidance of both the top and bottom lines and caused a decline in Sonim stock price to $3 from a peak of around $18 per share in June. Sonim began restructuring efforts since September of 2019, following the appointment of a new CEO, Tom Wilkinson; and CFO, Bob Tirva. Forward-looking guidance was suspended as the restructuring efforts began when the stock trended below $1 per share.

Prior to joining 180, Kevin ran a fund called RGJ Capital, where he was a significant shareholder in a company called Xplore Technologies, which was led by Tom Wilkinson, the new CEO of Sonim. Under Tom's leadership, Xplore's business was dramatically improved, and the company was ultimately acquired.

180 had confidence in Tom's ability as an executive to engineer a similar turnaround at Sonim. One of Sonim's first priorities was to clean up its balance sheet. Sonim's outstanding loans created substantial uncertainty as to the viability of the current business and prevented the company from investing in next-generation mobile devices and connectivity platforms. We believe that the removal of this debt overhang, coupled with cash infusion to fund development of future product lines could unlock value in the near term and allow management to focus on long-term value creation.

This past quarter, 180 incurred a public offering of 36.8 million common shares at $0.75 per share that raised gross proceeds of $27.6 million. An additional 8.3 million shares were issued in exchange for conversion of 60% of the outstanding debt. The $4 million was repaid in cash. Sonim now has a clean balance sheet with no debt and substantial capital resources to fund development of its next-generation devices.

180's investment at $0.75 per share equated to an enterprise value to trailing revenues of less than 0.2x. Xplore, a good comparable publicly traded company was acquired at approximately 1x enterprise value to trailing revenues.

First responder connectivity has become increasingly important as the COVID-19 pandemic as well as other domestic and global investments place additional importance on connectivity in all environments. This secular trend can provide meaningful growth opportunities for Sonim. Just to note, yesterday, Sonim closed at $1.09 a share, $0.45 increase from our cost basis.

Please turn to Slide 22. This slide lists our 10 largest legacy privately held holdings by value as of the end of the quarter. For the quarter, our private portfolio increased in value by approximately $10.6 million or $0.34 a share. The increase in value was led by Petra with additional contributions from EchoPixel and ORIG3N. These increases in value were offset in part by the decrease in Lodo Therapeutics Corporation.

Last quarter, a number of our private portfolio companies were adversely impacted by the COVID-19 pandemic. While many of these companies have recovered in part or in full from such impacts, it remains uncertain if negative impacts into value will return in future quarters. We also noted that certain of our privately held companies were well positioned to provide valuable diagnostic and monitoring capabilities that could lead to material growth for those companies. For example, in April 2020, ORIG3N received an Emergency Use Authorization from the Food and Drug Administration for its novel COVID-19 test. ORIG3N's high-throughput automated test capabilities have generated meaningful growth to the company as it addresses this ever-increasing market need.

In last quarter's shareholder letter, we stated that while we desire -- that we desire to shepherd our existing private portfolio to access or explore opportunities to sell our positions in those companies, we have the luxury of not -- of being able to sell our private holdings when we believe it makes sense for shareholders rather than being forced to do so to survive. The remaking of our business and the significant cash and securities of publicly traded portfolio companies that we have grown mean we do not have to sell anything. This ability allowed us to benefit from the acquisition of Petra by an undisclosed party in Q2 2020 and possibly other liquidity events in the future.

As a refresher on the Petra acquisition, the acquiring company in the terms of the deal are confidential. So we can only speak to what 180 received from the transaction. We received approximately $4.4 million in cash at closing. In addition, we received another $305,000 in cash from 180's ownership in an entity affiliated with Petra called Accelerator IV-New York.

Also, approximately $350,000 will be held in escrow for 1 year from the date of closing. 180 is also eligible, through its ownership in the acquired company and the affiliated entity Accelerator, to receive up to approximately $86.9 million in potential future payments upon the achievement of undisclosed development and commercial milestones. 180 currently estimates that the first milestone payment could occur in approximately 2 to 3 years, and subsequent milestone payments could occur at various points in time over the subsequent 10 to 20 years.

The timing and likelihood of the acquirer achieving these milestones is highly uncertain. And if these milestones are achieved, the timing may be materially different than the current estimates. These factors were used to develop a fair market value based on a probability net present value analysis of the future -- potential future milestone payments of approximately $6.4 million. We note that successful completion of the first milestone alone would result in payment of approximately $6.8 million to 180.

Lastly, simultaneously -- simultaneous with the close of the transaction, Petra spun out certain assets into a new company. We own shares of this new company, Revanna Pharmaceuticals, Inc.

Overall, we are more confident in the potential for our current privately held portfolio in aggregate to generate future returns that -- than we were when we started 3.5 years ago and even at the beginning of 2020.

Why is that, you might ask? When we started at 180, our private portfolio was comprised of 31 positions valued greater than 0. Today, we have 18 positions valued greater than 0. Most of which remain in the portfolio because they have demonstrated staying power and the ability to secure our capital from other investors.

At the end of 2016, our top 10 investments accounted for $42.7 million or 79% of total value of the private portfolio, with 3 positions valued at more than $6.5 million. We sold one of these positions, HZO, for $7 million in 2018. AgBiome has increased in value to $13.2 million. D-Wave has not performed, and its value has dropped materially in Q1 2020 to $1.2 million from almost $10 million at the end of 2016.

Today, our top 10 investments by value accounted for $36.8 million or 91% of the total value of our private portfolio. Aside from the fair value of potential future milestone payments of the sale of Petra of approximately $6 million, we only have one private portfolio company valued at more than $3.1 million, and that's AgBiome.

The write-downs of many of our private portfolio holdings in Q1 2020, coupled with the attrition of other companies in the portfolio -- other private companies in the portfolio, either through sale, IPO or liquidation, have materially reduced overall risk in the private portfolio. That's not to say that there will not be future write-downs or write-offs of some the -- our current positions in the future. We expect that there will be by the impact of these negative events, if they occur, would, on balance, impact NAV to a lesser extent than they would have in the past.

On the flip side, we believe there could be the opportunity for materially positive impacts to NAV from successful exits, like Petra, should they occur.

As mentioned previously, we now have a balance sheet that allows us to see our private portfolio through to its natural end rather than being forced to sell positions to survive. We're not making any promises with regards to the private portfolio. We're just stating our belief that it has been materially derisked as compared with prior periods, but particularly when we started 180. As Kevin mentioned earlier, we believe our current stock price does not accurately reflect the status of our private portfolio, particularly when taken into account this information.

Please turn to Slide 23. As we have noted in previous letters, we have dramatically reduced our cost structure under our new strategy. In 2016, before our funds changed in investment focus and management team, our operating expenses, excluding stock-based compensation and interest on outstanding debt, averaged approximately $1.3 million a quarter. For Q2 2020, our operating expenses equaled approximately $893,000, a 17% increase from a year ago. A material portion of this increase was directly related to the legal expenses incurred with registering -- as a registered investment adviser and other start-up costs associated with our separate account for a portion of a publicly traded company's pension fund.

I remind shareholders that our Q1 2020 expenses included a reversal of the deferred portion of the 2019 bonus of approximately $317,000. This deferred portion of the 2019 bonus was not reinstituted as of the end of Q2, but we note that this deferred business could be reinstituted in the future quarter at the discretion of the compensation committee of our Board of Directors.

Please turn to Slide 24 and 25. We continue to anticipate that reductions in our operating expenses as a percentage of net assets will be based on growth in our net assets rather than further reductions in our expenses. The positive events in Q3 2020 discussed previously, if they hold throughout the quarter and year, will help reduce these expense ratios as of the next quarter and as of the end of the year.

We remain committed to treating every dollar of shareholder money with the utmost care and consideration. As we've stated often, it is much easier for us to grow NAV when our expense hurdle rate is where it is today.

I'll now turn the call back over to Kevin.

Thanks, Daniel. It's been a crazy year. I'm happy we're up year-to-date, although I fully recognize this world can turn ugly based on a number of factors, the pandemic being the greatest concern. And now we're moving to the forefront, the U.S. election, and we expect extreme volatility around that event.

Smooth sailing doesn't seem to be in the forecast. We will just focus on finding value, doing the work in individual names. And when the time and the value are there, just like they were with Sonim this quarter, we'll make concentrated investment decisions.

Daniel, why don't we open it up for Q&A. Daniel?

Oh, sorry. My apologies. (Operator Instructions)

So Brandon, please go ahead.

Great quarter. Looking at D-Wave, I haven't looked at the private portfolio in a while. When was that marked down? I mean we saw it was under $2 million and, at one point recently, I don't know, last year, the year before, substantially higher. What was the material events that caused that big markdown in D-Wave?

It was marked down last quarter. Daniel, if you want to get into specifics?

Sure. So Brandon, so D -- was last quarter that the markdown occurred, and it was directly related to a financing event that repriced the company as well as -- and you may have noticed, if you look in the financial statements as well, as part of that restructuring that somebody did restructure the securities that were outstanding, collapsed everything into one preferred share class and changed its name from a holding company perspective to DWSI Holdings, but it still does business under D-Wave Systems. But it was all related to a financing event.

Okay. So it was recently last quarter then. I just hadn't noticed it before.

That's correct.

Yes. The $25 million you're managing, has that been put to work? And if so, has it been put to some of the similar situations you're involved in? And are -- how large do you expect to raise that $25 million, too?

Nice to hear from you, Sam. Hope you're staying healthy. Yes, we received the money. Yes, we put about 40% of the assets to work. It actually generated approximately 15% return since we started in the middle of June. So we're quite pleased with how disciplined we've been about investing the assets and, obviously, the returns that we've gotten from those assets.

And it's an important note in terms of how we think about managing money, we don't just get the money and put the money to work day 1. This is a concentrated portfolio process. And if we don't have a good idea, we're not going to force the money into the market just because we have it. And that will be the same for the new fund that we'll be managing. In that it will be almost a call -- call it a capital model where, let's say, we raised $100 million, Sam. We're not going to put the $100 million to work. We're only going to put the money to work when we have an idea. That's how I wanted to raise -- to manage money ever since I led BlackRock. I don't want to just force the money into the market. I think that's how investors go -- arrive, and that they do really, really well. The money comes in, usually at the peak. They put into the marketplace, and then the returns get muted. We're only going to put the money that work from that good idea.

And how much do we expect to raise on top of that? I don't know. I mean I'd like to think that we have the capacity to raise $100 million to $200 million on top of the balance sheet that we have plus the $25 million. We just got started on that process. I guess we're -- even though I've been around 30 years, I guess we're kind of new to the rest of the world. And some folks are going to have to get comfortable with how we think about investing, and they're going to want to follow us and watch our performance. And you know the way that all works.

So we're hopeful. We're optimistic. But we think we've done a good job for people, and we think that we'll take care of people's assets, if and when they show us the confidence to let us manage the money. So we're optimistic about being able to raise more money on top of the $25 million, Sam.

And at this point, have you invested into similar ideas or same stocks for the $25 million as you've done for 180 Degree?

Yes. If we -- so for Sonim, for example, it was a side-by-side investment. A portion of that money of our investment came from 180's balance sheet. And then next to that was a significant investment for the pension fund.

There are times where 180 doesn't have as much cash, let's say, as when you get new money in. So there's a couple of new ideas that have gone into the pension fund, that haven't gone into 180, but that's only because we're fully invested or have been fully invested on 180.

But if the cash is there for both funds, you should think that we'll have the same exact weight of a certain position for each of the funds. So there might be some -- from some differing names here and there. But all in all, the performance should look fairly similar as you go through time.

Well, sounds good. And keep up doing what you're doing, and then the $25 million will grow. Good luck.

I hope so. Thanks a lot.

Tom, go ahead.

Daniel, thanks again for the update. You guys have continued to deliver on your approach, and you've been consistent. So I appreciate the follow-through and doing what you're doing. So congratulations on that.

A follow-up to the Petra sale, how much pennies as a -- for pennies on the NAV or whatever measurement you might have are the milestone payments? So are there -- is there any part of your current $2.70 NAV that you put out that is the milestone payments from the Petra sale?

So I think what we…

Sorry. Go ahead.

Go ahead. No. Please go ahead.

So Tom, so yes, it is. So we do have to fair value those potential milestone payments. As I mentioned, there is the potential for about $86.9 million of future payments over admittedly a long period of time. The first one potentially could occur, we estimate currently in about 2 to 3 years. The -- could be slower -- it could be faster, it could be shorter -- or it could be longer, but that's our approximate at the moment.

We currently fair value all of those milestone payments that 80 -- that stream of 86.4 -- of $86.9 million and approximately $6.4 million currently.

So Tom, what I'd say on that is, you got to haircut your views on the likelihood of those milestone payments taking place. Although I will say the following. I said it earlier. The market is basically paying us for -- if you give us full credit for our cash and liquid securities, literally $1.80 per share last night. The market was paying us $4 million for $40 million in assets. There's one milestone payment. The first one is a significant one, and it's barely based on -- the likelihood of that one happening is greater than 50%. I think we probably have it at 75%. In reality, it's probably 99%. I don't know why the acquiring drug company would have bought this business, if they didn't intend on bringing the drug to trial. And that's kind of what the first one is based on in generic terms.

So -- and that alone is greater than the -- what the market is paying us for the entire portfolio, the whole thing is absurd. I understand it. I get it. But I'd like to think that over the course of the last 3.5 years, we've shown that from time to time, many of our holdings, not only get monetized, but they get monetized at greater than the NAV we had them on our balance sheet for. So we'll see where that goes.

There's also another -- there's a world out there the folks that like to buy royalty streams or milestones. So we may look to market that. I think we will look to market that. And like everything else, if someone's willing to pay us a fair price, it's not who we are, what we want to be anymore. Obviously, our goal is to be -- we're -- we invest in public companies. That's what 180 is, with a private portfolio of history.

So if somebody wants to pay a fair price, we'll sell it. If somebody wants to come in and offer us a stupid price, we'll tell them to go take a walk. And that's the beauty of what we've done over the last 3.5 years is, we don't need to sell anything.

And when I first got here 4 years ago, we had almost sell anything that we could to get more cash on our balance sheet and overcome the high operating expenses we have.

So we feel good about that royalty payment stream. We think it's worth more than what the market is paying us for the entire portfolio, which I think is, as I said, absurd to begin with. But we'll see how it plays out. It's just a royalty streaming it. You have to hit certain milestones to get paid on it.

So is that $6.4 million in the $40 million portion of the private portfolio value at the end of June?

Yes.

It is.

Okay. So is it about $0.21 on the NAV?

Correct. And 31.1 million shares outstanding.

All right. Austin, please go ahead.

Yes. I had a question on 3 of the private portfolio -- you maybe not be able to answer any question on them, but do you have the information, public of some sort, on Nanosys, D-Wave? I know you talked about just a minute ago their reformation or something. But about their operations and what's going on there? And the biggest holding of those AgBiome at all?

So Daniel, why don't you provide some color on those holdings as best you can?

Absolutely. So Austin, thanks for the question. So I think first is, to your point, I mean we are governor to confidentiality provisions, and so there's -- we are limited in the detail that we can go into. But in terms of publicly available information, which we can, maybe I'll start with AgBiome.

Yes. AgBiome launched one of their first products this year called Howler. It is available on a variety of different websites, and its unique biologics for pest control that is applicable in both turf and ornamental spaces. So lawn maintenance, golf courses, but also in the farming and other general opportunities, where there's a certain pest that it goes after that. Pretty tough to manage. And this product actually does an extremely good job.

So first product on the market. It's great to see it came to market and got EPA approvals faster than, I think, any other product that was launched. A testament to the tech nuts for their approach and what they're bringing to market. They have a variety of other brands that they own that are both -- that are chemicals, that are on the market as well without their first biologic. And then they combine those chemicals with biologics to produce an even better product and extend [cattle lives] and a variety of interesting growth opportunities for the company.

They did also sign a deal with Genective that was announced at the end of last year. They've signed a couple of other deals as well. So company is doing well. I think they're entering into that commercial phase of development, which is exciting as well as working and securing additional opportunities and partnerships with large companies.

Nanosys, so interesting trend that I think is out there -- it's out there publicly. And you can see it, is that the OLED -- so that the OLED -- the QLED, they're called, the Quantum-Dot LED televisions, are selling really well. And in fact, during the pandemic, now that you have a lot of people obviously at home, television sales, especially high-end television sales, have increased year-over-year versus decreased. And a lot of that is due to just everybody's home, and now they can think about -- and they use their televisions more. And so they can think about that they want to upgrade. And so it's actually counterintuitive. And so the company is actually doing fairly well.

They actually just also announced a partnership with a large chemical company in Japan, which will help distribution of their products within the television, manufacturing market. So generally, bullish on the trends.

I'll caveat that with -- the company has been around since 2001. It is almost an age allowed to drink and it's allowed to vote. It's allowed to see an rated movie. It's -- and so it's -- when it hits that growth escape velocity of revenue growth, I don't know. But it's been able to sustain itself, and the question now is, can they transition from a stable business to a growth business. And that's what we're waiting to see. And hopefully, it's sooner rather than later, given how long this company has been around.

And lastly, with D-Wave, I think you can see the announcements that have come out publicly earlier this year. Alan Baratz took over as CEO. He's a very successful person within the software and computing industry, a really impressive guy. So very bullish on his -- the opportunity, the skill set that he brings to the company to lead it to the next level.

But it's been tough. Fundraising has been very difficult. Sales have been difficult. They've transitioned to a cloud computing model, which I think is the model going forward that they're going to need to use to grow. But it has not been an easy transition and obviously has resulted in a material decrease in value, partially due to the COVID impact. There were some other impacts, geopolitical impacts, that caused -- made fundraising more difficult as well. But at the end of the day, they weren't able to raise capital at a -- and maintain or increase their valuation. And unfortunately, it's come down.

Now it's been derisked from a value perspective on our balance sheet, which I think we feel very -- we're more comfortable with. But it's unfortunate, obviously, given the -- the prior valuation and prior rounds of financing and prices of those at which those occurred.

That one actually may be eligible for social security. At some I think that company was started in 1999. Daniel, is that right?

You are correct. That's a very good point.

So we'll see. You never know when you get paid. It's just like we never know -- we honestly had no clue that Petra was going to get taken out. And it comes when it comes. So as Daniel said, we think we like to think that we've derisked the portfolio to a point where many of these companies have sustained themselves for a reason. It's because there's actually a business there that people still want to invest in. And we'll have the opportunities to monetize more of our names. We've got some names in there that are certainly doing well because of COVID and diagnostic testing, and we'll see where that goes. And then maybe you can have a monetization event around that from some of our holdings. So we'll see.

We feel -- I feel better about the portfolio today than when I first got here in the middle of '16.

Brandon, go ahead.

Just confirming what I saw in the slides. Your current NAV, as of yesterday, because it looks like you updated on the slide as of August 10, it's $3.05, $2.70, plus it looks like [$0.35] in the public portfolio, appreciation from June 30. Is that a true statement, $3.05 NAV right now?

So there's 2 assumptions in there. One, we give people that information so that they have a sense to do the math like you just did. The 2 assumptions are: one, our private portfolio is flat. And we don't know that today. We always look at that at the end of the quarter. So make the assumption, the private portfolio is flat, you got to take out a couple of cents of operating expenses, maybe another $0.01 for a reversal of an accrual, we'll see. But your math is dead on.

Okay. So you're about where, NAV-wise, on these 31?

So what you said -- I'm sorry. I was talking over you. What were you saying?

Sorry. So I think your NAV on these 31 was $3.06.

So we're close to being right. As of last night, we're an open-end mutual fund. We'd be right around that number. With, again, the assumption to private portfolio is slightly up. They got some expenses.

And I still see a $1 stock price. So I guess when they -- Daniel will back at it.

Yes. Excellent. All right. (Operator Instructions)

It looks like the queue is complete.

Well, thanks, everyone. It's been a wild year and unsettling times and certainly volatile. We appreciate your interest in us. You know where to find us, either by e-mail or phone. At any given point in time, we're more than happy to talk about what we're doing, where we're going, what our thoughts are on our individual names or on the markets.

We hope that everyone stays safe and healthy, and we look forward to reporting to you on our Q3 results sometime in November.

Thank you, everyone. You can now disconnect.