Hunterbrook Media published on Hercules Capital (NYSE: HTCG — $2.61 billion), a technology-focused BDC. Hunterbrook said that Hercules “is among the most software-exposed business development companies (BDCs),” marks its software investment loans around 100 cents on the dollar, and trades at a premium valuation. Hunterbrook also noted that Hercules historically grew by issuing stock at a premium to NAV and appears to misclassify some software investments to lower its reported software exposure. Hunterbrook summarized:
“The software sector that backs 70 cents of every dollar of NAV is in its worst downturn in years. [Hercules Capital] marks haven’t meaningfully moved. The income is increasingly phantom. The dividend cushion is a rounding error. And the warrant portfolio that once absorbed losses has shrunk to a fraction of what it was. These are the facts as they appear in Hercules’ own filings — if you dig for them. The valuation assumes none of them matter.”
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