HTGC
Hercules Capital, INC
NYSE
DEF 14A: Hercules Capital Seeks Stockholder Approval for Below-NAV Share Issuance at Annual Meeting
Sentiment:
Proxy Statement
23 April 2024 4:18 PM
Hercules Capital is asking stockholders to approve the authorization to sell or issue shares of its common stock at a price below its net asset value (NAV) per share, subject to certain conditions, at the upcoming annual meeting on June 20, 2024.
Capital raise
The company is seeking authorization to sell or issue shares below NAV, up to 25% of outstanding shares, with a maximum discount of 25%.
The company argues that this flexibility is needed to take advantage of investment opportunities during volatile market conditions, maintain RIC status, manage debt-to-equity ratios, and avoid less favorable capital-raising methods.
Summary
- Hercules Capital is holding its annual meeting on June 20, 2024, and is seeking stockholder approval on several key proposals.
- The proposals include the election of three independent directors, an advisory vote on executive compensation, authorization to sell shares below NAV, and ratification of the selection of the independent public accountant.
- A key proposal is the authorization for the company to sell or issue shares below its NAV, with a limit of 25% of outstanding shares and a maximum discount of 25% below NAV.
- The company argues that this flexibility is needed to take advantage of investment opportunities during volatile market conditions, maintain RIC status, manage debt-to-equity ratios, and avoid less favorable capital-raising methods.
- Stockholders are advised to consider the potential dilutive effect of below-NAV sales.
- The Board recommends voting for all proposals.
Sentiment
Score: 7
Explanation: The document presents a balanced view, highlighting both the potential benefits and risks of the proposed actions. The company's strong performance and commitment to stockholder returns contribute to a positive outlook, but the potential for dilution tempers the sentiment.
Positives
- The company emphasizes its commitment to maximizing total stockholder returns.
- The Board highlights the importance of having the flexibility to conduct below-NAV sales to protect stockholders during extreme market conditions and seize short-term opportunities.
- The company has a clawback policy for incentive awards.
- The company has stock ownership guidelines for executive officers and directors.
- The company has anti-hedging and anti-pledging policies.
Negatives
- Below-NAV sales can dilute existing stockholders' ownership if they do not participate in the offering.
- The company acknowledges that non-participating stockholders face the greatest potential risks from below-NAV sales.
- The company is seeking authorization to sell shares below NAV, up to 25% of outstanding shares, with a maximum discount of 25%.
Risks
- Market volatility could cause the valuation of a portfolio company to decline, the Company to sustain unrealized losses with respect to that portfolio company and stockholder equity to decrease in proportion to the Company's outstanding debt.
- The company acknowledges that non-participating stockholders face the greatest potential risks from below-NAV sales.
- The company is seeking authorization to sell shares below NAV, up to 25% of outstanding shares, with a maximum discount of 25%.
Future Outlook
The Board and the entire Hercules team remain steadfast in their efforts to maximize total stockholder returns and expand platform capabilities for the benefit of clients.
Management Comments
- Scott Bluestein, CEO, emphasizes the company's commitment to protecting stockholder investments and maximizing total stockholder returns.
- Scott Bluestein, CEO, notes that the approval to sell shares below NAV is protective to stockholders during times of extreme market conditions.
Industry Context
The document references the performance of Hercules Capital compared to a peer group of BDCs, financial services companies, and REITs, highlighting its strong performance relative to its peers.
Comparison to Industry Standards
- The Compensation Committee analyzes a peer group of internally managed BDCs, financial services companies and real estate investments trusts, or REITs.
- The Peer Group analyzed in connection with 2023 compensation determinations is set forth below.
- The Compensation Committee believes the Peer Group reflects the labor market for our officer and employee talent, has a similar investor base, and, like the Company, the BDCs and REITs are pass-through entities with the majority of earnings required to be distributed to stockholders as a dividend.
- As of December 31, 2023, the Company generally outperformed most of its Peer Group over the one-, threeand five-years as follows: Return on Average Assets(ROAA) (excl. cash) Return on Equity (ROE) Return on Invested Capital(ROIC) Average AnnualShareholder Return (AASR).
- The Compensation Committee believes that compensation paid to our NEOs for 2023 was commensurate with the Company's overall absolute performance as well as our performance relative to the Peer Group during the relevant performance periods.
Stakeholder Impact
- Stockholders may experience dilution if they do not participate in below-NAV sales.
- Employees are impacted by the executive compensation program.
- The company's investments impact technology and life sciences companies.
Next Steps
- Stockholders are encouraged to vote on the proposals before the annual meeting on June 20, 2024.
- The company will announce preliminary voting results at the annual meeting and file final results with the SEC.
Key Dates
- 2004: Hercules Capital has committed more than $19 billion to technology and life sciences companies since this year.
- April 19, 2024: Record date for the annual meeting.
- April 23, 2024: Planned mailing date of the proxy statement to stockholders.
- June 20, 2024: Date of the Annual Meeting.
- December 24, 2024: Deadline for stockholders to submit proposals for the 2025 annual meeting.
Keywords
proxy statement, annual meeting, below-NAV sales, stockholder vote, executive compensation, independent directors, Hercules Capital, NAV, shares, directors
HTGC
Hercules Capital, INC
NYSE
Sector: Financial Services
Filings with Classifications
Delay expected
8 July 2025 2:09 PM
Beneficial Ownership Disclosure Amendment
- The filing is a remediation for a disclosure that should have been submitted in 2021, indicating a delay in the initial reporting of beneficial ownership.
Capital raise
20 June 2025 4:17 PM
Annual Meeting Results
- Proposal 3 sought authorization for the Company to sell or issue shares of its common stock at a price below its then-current net asset value (NAV) per share.
- This proposal was not authorized by stockholders, which limits the company's ability to raise capital through equity issuance below NAV.
Capital raise
16 June 2025 5:23 PM
Debt Offering and Credit Facility Amendment
- The company issued and sold $350,000,000 in aggregate principal amount of its 6.000% Notes due 2030 in a public offering.
Capital raise
1 May 2025 4:30 PM
Earnings Release
- The company closed an offering of $287.5 million of 4.750% convertible unsecured notes due 2028.
- During the first quarter 2025, the Company sold 2.0 million shares of common stock under the equity ATM program for total net proceeds of $39.4 million (net of $0.7 million of offering expenses).
- During April 2025, the Company sold 2.2 million shares of common stock under the equity ATM program for total net proceeds of $41.5 million (net of $0.3 million of offering expenses).
Worse than expected
1 May 2025 4:16 PM
Quarterly Report
- The company experienced a net decrease in net assets resulting from operations, indicating a less favorable financial performance compared to previous periods.
- Net realized losses were recorded for the period, suggesting challenges in the company's investment strategies.
- There was a net change in unrealized depreciation on investments, indicating a decline in the value of the company's portfolio.
Capital raise
24 April 2025 9:04 PM
Proxy Statement
- The company is seeking authorization to sell or issue shares of its common stock at a price below its then-current net asset value per share.
- The company has no immediate plans to sell or issue shares of its common stock at a price below net asset value, but is asking for stockholder approval now so that it has flexibility if in the future it determines that such a sale is in stockholders best interests.
- These sales typically must be undertaken quickly in an attempt to protect the value of your investment so it is critical that we have stockholder approval ahead of time.
Better than expected
24 April 2025 4:16 PM
Proxy Statement
- The company's performance relative to its peer group was generally at or above the 90th percentile, and in most cases at the 100th percentile, measured using ROAA, ROE and AASR.
Capital raise
24 April 2025 4:16 PM
Proxy Statement
- Hercules Capital is seeking stockholder approval to sell or issue Shares, in one or multiple public or private offerings, at a purchase price below the then-current NAV during the 12-month period expiring on the anniversary of the Annual Meeting, subject to the conditions and stockholder protections described herein.
- The number of Shares sold or issued in Below-NAV Sale may not exceed 25% of the number of thencurrent outstanding Shares.
- The purchase price of each Share sold in a Below-NAV Sale may not be more than 25% below the then-current NAV per Share.
Capital raise
6 March 2025 1:35 AM
Capital Markets Transaction
- Hercules Capital is issuing $250 million in convertible unsecured notes due 2028 in a private placement.
- The initial purchasers have an option to purchase an additional $37.5 million to cover overallotments.
- The notes are convertible into common stock at an initial conversion price of approximately $21.48 per share.
- The company intends to use the net proceeds for investments and general corporate purposes.
Capital raise
5 March 2025 7:53 AM
8-K Filing
- Hercules Capital plans to offer $250.0 million aggregate principal amount of its Convertible Unsecured Notes due 2028.
- The Company plans to grant the initial purchasers an option to purchase up to an additional $37.5 million principal amount of the Convertible Notes to cover overallotments, if any.
Capital raise
13 February 2025 4:30 PM
Earnings Release
- During Q4 2024, the Company sold 8.0 million shares of common stock under the agreement for total net proceeds of approximately $152.0 million (net of $1.6 million of offering expenses).
- During January 2025, the Company sold 2.0 million shares of common stock under the equity ATM program for total net proceeds of $39.8 million (net of $0.3 million of offering expenses).
- The Company has 30.0 million shares remaining available for issuance and sale under the equity ATM program, as of December 31, 2024.
Worse than expected
13 February 2025 4:30 PM
Earnings Release
- Q4 2024 NII decreased compared to Q4 2023 due to a lower weighted average yield on the debt investment portfolio and an increase in total net operating expenses.
Capital raise
12 December 2024 4:40 PM
Equity Offering Announcement
- Hercules Capital may issue and sell up to 30,000,000 shares of its common stock.
- The company intends to use the net proceeds from this offering to fund investments in debt and equity securities, make acquisitions, retire certain debt obligations, and for other general corporate purposes.
Capital raise
12 December 2024 11:36 AM
Prospectus Supplement
- Hercules Capital is offering up to 30 million shares of common stock through an at-the-market offering.
- The company intends to use the net proceeds to fund investments, acquisitions, retire debt, and for general corporate purposes.
Worse than expected
12 December 2024 11:36 AM
Prospectus Supplement
- The document indicates that the company may sell shares below NAV, which would result in immediate dilution to existing shareholders.
Better than expected
2 December 2024 4:47 PM
Credit Facility Amendment
- The increase in the credit facility and the extension of the maturity dates are better than the previous terms.
Better than expected
30 October 2024 4:30 PM
Quarterly Report
- The company reported record total investment income and net investment income, exceeding previous results and expectations.
Worse than expected
30 October 2024 4:16 PM
Quarterly Report
- The company's net change in unrealized appreciation (depreciation) was negative for the three and nine months ended September 30, 2024.
- The company's net realized gain (loss) was negative for the three months ended September 30, 2024.
Capital raise
30 October 2024 4:16 PM
Quarterly Report
- The Company may from time-to-time issue and sell shares of its common stock through public or ATM offerings.
- The Company currently sells shares through its equity distribution agreement with JMP Securities LLC (JMP) and Jefferies LLC (the 2023 Equity Distribution Agreement).
- The 2023 Equity Distribution Agreement provides that the Company may offer and sell up to 25.0 million shares of its common stock from time to time through JMP or Jefferies, as the Company's sales agents.
- Sales of the Company's common stock, if any, may be made in negotiated transactions or transactions that are deemed to be at the market, as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.
- Additionally, on August 7, 2023, the Company sold 6.5 million shares of common stock through an upsized public offering pursuant to an underwriting agreement with Morgan Stanley & Co. LLC, UBS Securities, and Wells Fargo Securities, LLC as joint book-running managers to sell.
- As of September 30, 2024, approximately 13.6 million shares remain available for issuance and sale under the current equity distribution agreement.
Capital raise
16 August 2024 4:16 PM
Shareholder Meeting Results
- The document details the approval for the company to sell or issue shares of its common stock at a price below its then-current NAV per share.
- This authorization provides the company with the option to raise capital by issuing shares below NAV.
Delay expected
16 August 2024 4:16 PM
Shareholder Meeting Results
- The annual meeting was initially held on June 20, 2024, and then adjourned to August 15, 2024, specifically to vote on Proposal 3.
Better than expected
1 August 2024 4:20 PM
Quarterly Report
- The company reported record total gross fundings, total investment income, and net investment income, all exceeding previous periods.
Capital raise
21 June 2024 8:32 AM
Annual Meeting Results
- Proposal 3, which was adjourned, concerns the authorization of the Company to sell or issue shares of its common stock at a price below its then-current NAV per share.
Delay expected
21 June 2024 8:32 AM
Annual Meeting Results
- The vote on Proposal 3, regarding the authorization to sell shares below NAV, was delayed and will be held on August 15, 2024.
Better than expected
2 May 2024 4:31 PM
Quarterly Report
- The company reported record Q1 commitments and fundings, significantly exceeding previous periods.
- Net investment income increased by 20.9% year-over-year, indicating strong financial performance.
- The company's net asset value per share increased by 1.7%, demonstrating growth in shareholder value.
Capital raise
2 May 2024 4:31 PM
Quarterly Report
- The company sold 3.7 million shares of common stock under the ATM program during Q1 2024 for net proceeds of approximately $66.4 million.
- The company has 13.6 million shares remaining available for issuance and sale under the equity ATM program.
Better than expected
2 May 2024 4:17 PM
Quarterly Report
- The company's net investment income increased by approximately 21% year-over-year.
- The company's total assets increased by approximately 8% since the end of 2023.
- The company's net asset value per share increased by approximately 2% since the end of 2023.
Capital raise
2 May 2024 4:17 PM
Quarterly Report
- The company issued and sold 3.7 million shares of its common stock through its equity distribution agreement, receiving net proceeds of approximately $66.4 million.
- As of March 31, 2024, approximately 13.6 million shares remain available for issuance and sale under the current equity distribution agreement.
Capital raise
23 April 2024 4:18 PM
Proxy Statement
- The company is seeking authorization to sell or issue shares below NAV, up to 25% of outstanding shares, with a maximum discount of 25%.
- The company argues that this flexibility is needed to take advantage of investment opportunities during volatile market conditions, maintain RIC status, manage debt-to-equity ratios, and avoid less favorable capital-raising methods.
Capital raise
15 February 2024 4:31 PM
Earnings Release
- The company sold 6.5 million shares of common stock under the ATM program for total net proceeds of approximately $99.9 million during Q4 2023.
- The company has 17.3 million shares remaining available for issuance and sale under the equity ATM program.
Better than expected
15 February 2024 4:31 PM
Earnings Release
- The company's Q4 and full-year results exceeded expectations with record total investment income and net investment income.
- The company's core yield of 14.3% for Q4 2023 exceeded the expected annual range of 13.8% to 14.0%.
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