8-K: SuRo Capital Corp. Announces Preliminary Q1 2024 Results and Portfolio Update

SuRo Capital Corp. estimates its net asset value per share to be between $6.90 and $7.40 as of March 31, 2024, and provides an update on its investment portfolio.

Summary

• SuRo Capital Corp. has released preliminary estimates for its first quarter ended March 31, 2024.
• The company's net asset value (NAV) per share is estimated to be between $6.90 and $7.40 as of March 31, 2024.
• This compares to a NAV of $7.99 per share at December 31, 2023, and $7.59 per share at March 31, 2023.
• As of March 31, 2024, there were 25,353,284 shares of the company's common stock outstanding.
• The company's investment portfolio includes 38 companies, with 35 privately held and 3 publicly held.
• During the quarter, SuRo Capital invested $10.0 million in Supplying Demand, Inc. (Liquid Death).
• The company exited its position in Nextdoor Holdings, Inc. for $0.2 million, resulting in a $0.4 million loss.
• They also received $0.1 million from the sale of PSQ Holdings, Inc. warrants, realizing a $0.1 million gain.
• SuRo Capital's liquid assets were approximately $84.6 million as of March 31, 2024.
• The company repurchased 2.0 million shares at $4.70 per share through a Modified Dutch Auction Tender Offer.
• The company has $20.7 million remaining under its share repurchase program, which is authorized through October 31, 2024.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company is making new investments and repurchasing shares, the decrease in net asset value per share and the loss on the Nextdoor investment are concerning. The management's positive comments are somewhat offset by the financial results.

Positives

• SuRo Capital made a new $10 million investment in Liquid Death, indicating continued investment activity.
• The company successfully executed a Modified Dutch Auction Tender Offer, repurchasing 2.0 million shares.
• The company has $20.7 million remaining under its share repurchase program, suggesting potential for further buybacks.
• The company has $84.6 million in liquid assets, providing financial flexibility.

Negatives

• The estimated net asset value per share decreased from $7.99 at December 31, 2023, to between $6.90 and $7.40 as of March 31, 2024.
• The company realized a $0.4 million loss on the sale of Nextdoor Holdings, Inc. shares.
• The preliminary financial estimates are unaudited and actual results may differ materially.

Risks

• The company's net asset value per share has decreased, which could negatively impact investor sentiment.
• The company's investments are subject to market volatility, which could affect their value.
• The preliminary financial estimates are unaudited and may not accurately reflect the final results.
• The company's portfolio includes private companies, which may be subject to lock-up provisions and have limited liquidity.

Future Outlook

The company expects to announce its first quarter ended March 31, 2024 results in May 2024 and remains optimistic about its investment pipeline and the potential for new opportunities.

Management Comments

• We remain incredibly enthusiastic about both our investment pipeline and our current portfolio as the IPO market strengthens and new opportunities at compelling valuations continue to come to light.
• We are now executing on these opportunities.
• With these exciting new additions to our portfolio, and over $60.0 million in investable capital, we remain steadfast in our belief that there continue to be high-quality opportunities available at attractive prices that allow us to be both opportunistic and judicious with the deployment of capital.
• SuRo Capital is committed to initiatives that enhance shareholder value, and we believe the market is currently undervaluing our portfolio.
• Given the discount our stock has traded at compared to net asset value per share, we believe our recent Modified Dutch Auction Tender Offer was an efficient and accretive deployment of capital.

Industry Context

This announcement reflects the ongoing challenges and opportunities in the venture capital and private equity space, where companies are navigating market volatility and seeking to deploy capital strategically. The focus on share repurchases and new investments indicates a proactive approach to managing shareholder value in a dynamic environment.

Comparison to Industry Standards

• The decrease in net asset value per share is a concern, as many BDCs and investment funds aim to maintain or increase NAV over time. For example, Ares Capital Corporation (ARCC) and Main Street Capital (MAIN), both well-regarded BDCs, have generally shown more stable NAV trends.
• The share repurchase program is a common strategy among BDCs to address trading discounts to NAV, similar to what companies like Prospect Capital (PSEC) have done. However, the effectiveness of these programs depends on the size of the discount and the company's ability to generate returns.
• The investment in Liquid Death is a move into a consumer packaged goods company, which is a departure from traditional tech-focused venture capital. This is similar to what some private equity firms are doing, diversifying into different sectors to find growth opportunities.
• The loss on the Nextdoor investment highlights the risks associated with investing in public and private companies, similar to what other venture capital firms have experienced with their portfolio companies.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net asset value per share.
• The share repurchase program may provide some support to the stock price.
• The new investment in Liquid Death could be seen as a positive sign for future growth.
• Employees may be impacted by the company's overall performance and strategic decisions.

Next Steps

• The company expects to announce its first quarter ended March 31, 2024 results in May 2024.
• The company will continue to monitor leveraging the remaining $20.7 million authorized under its active Share Repurchase Program.

Key Dates

Keywords

Net Asset Value, Investment Portfolio, Share Repurchase, Tender Offer, Liquid Death, Private Equity, Venture Capital, Preliminary Results