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Section 1: 497 (FORM 497)

herc20190415_n2.htm

 

Table of Contents

Filed Pursuant to Rule 497
Registration No. 333-
231089

 

PROSPECTUS SUPPLEMENT

(To prospectus dated April 29, 2019)

 

 

 

Up to 12,000,000 Shares

Common Stock

 


We have entered into an equity distribution agreement, dated May 6, 2019, or the Equity Distribution Agreement, with JMP Securities LLC, or JMP Securities, relating to the shares of common stock offered by this prospectus supplement and the accompanying prospectus. Our common stock is listed on the New York Stock Exchange, or NYSE, under the trading symbol “HTGC.” The last reported sale price on the NYSE on May 1, 2019 was $12.93 per share. The net asset value per share of our common stock at March 31, 2019 (the last date prior to the date of this prospectus supplement on which we determined net asset value) was $10.26.

 

We are an internally managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. Our investment objective is to maximize our portfolio total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments.

 

The Equity Distribution Agreement provides that we may offer and sell up to 12,000,000 shares of our common stock from time to time through JMP Securities, as our sales agent. Sales of our common stock, if any, under this prospectus supplement and the accompanying prospectus 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 of 1933, as amended, or 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.

 

JMP Securities will receive a commission from us to be negotiated from time to time, but in no event in excess of 2.0% of the gross sales price of any shares of our common stock sold through JMP Securities under the Equity Distribution Agreement. JMP Securities is not required to sell any specific number or dollar amount of common stock, but will use its commercially reasonable efforts consistent with its sales and trading practices to sell the shares of our common stock offered by this prospectus supplement and the accompanying prospectus. See “Plan of Distribution” beginning on page S-15 of this prospectus supplement. The sales price per share of our common stock offered by this prospectus supplement and the accompanying prospectus, less JMP Securities’ commission, will not be less than the net asset value per share of our common stock at the time of such sale.

 

Please read this prospectus supplement, the accompanying prospectus, and any free writing prospectus before investing and keep it for future reference. The prospectus supplement, the accompanying prospectus, and any free writing prospectus contain important information about us that a prospective investor should know before investing in our common stock. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission, or the SEC. This information is available free of charge by contacting us at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, or by telephone by calling collect at (650) 289-3060 or on our website at www.htgc.com. The information on our website is not incorporated by reference into this prospectus supplement, the accompanying prospectus, or any free writing prospectus. The SEC also maintains a website at www.sec.gov that contains such information.

 


An investment in our common stock may be speculative and involves risks, including a heightened risk of total loss of investment. In addition, the companies in which we invest are subject to special risks. See the “Risk Factors” section beginning on page S-11 of this prospectus supplement, page 8 of the accompanying prospectus, in our most recent Annual Report on Form 10-K, in any of our other filings with the Securities and Exchange Commission, and in any free writing prospectus to read about risks that you should consider before investing in our common stock, including the risk of leverage.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 


JMP Securities

 

The date of this prospectus supplement is May 6, 2019.

 

 

Table of Contents

 

 

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus, any free writing prospectus, the documents incorporated by reference in this prospectus supplement and the accompanying prospectus, or any other information which we have referred you. We have not, and JMP Securities has not, authorized any other person to provide you with different information or to make representations as to matters not stated in this prospectus supplement, the accompanying prospectus, or in any free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and JMP Securities is not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus supplement, the accompanying prospectus, or any free writing prospectus is accurate only as of the date on the front cover of this prospectus supplement, the accompanying prospectus, or any free writing prospectus, as applicable. Our business, financial condition, results of operations and prospects may have changed since that date.

 

This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more general information and disclosure. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. You should read this prospectus supplement and the accompanying prospectus together with the additional information described under the heading, “Available Information” before investing in our common stock.

 

TABLE OF CONTENTS

 

Prospectus Supplement

 

 

Page 

Fees and Expenses

S-1

Forward-Looking Statements

S-3

Industry and Market Data

S-4

Prospectus Supplement Summary

S-5

The Offering

S-10

Risk Factors

S-11

Use of Proceeds

S-12

Price Range of Common Stock

S-13

Capitalization

S-14

Plan of Distribution

S-15

Senior Securities

S-16

Legal Matters

S-19

Experts

S-19

Available Information

S-19

 

Prospectus

 

 

Page

Hercules Capital, Inc.

6

Fees and Expenses

7

Risk Factors 8

Forward-Looking Statements

9

Use of Proceeds

10

Price Range of Common Stock and Distributions

11

 

 

Table of Contents

 

 

Page 

Portfolio Companies

12

Senior Securities

29

Certain United States Federal Income Tax Considerations

32

Sales of Common Stock Below Net Asset Value

40

Dividend Reinvestment Plan

44

Description of Capital Stock

45

Description of Our Preferred Stock

50

Description of Our Subscription Rights

51

Description of Warrants

53

Description of Our Debt Securities

55

Plan of Distribution

66

Custodian, Transfer and Dividend Paying Agent and Registrar

67

Legal Matters

67

Experts

67

Incorporation By Reference

68

Available Information

68

 

 

Table of Contents

 

 

FEES AND EXPENSES

 

The following table is intended to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The footnotes to the fee table state which items are estimates. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Hercules Capital, Inc.

 

Stockholder Transaction Expenses (as a percentage of the public offering price):

       

Sales load (as a percentage of offering price)(1)

    2.00 %

Offering expenses

 

0.14

%(2)

Dividend reinvestment plan fees

    (3)

Total stockholder transaction expenses (as a percentage of the public offering price)

 

2.14

%

Annual Expenses (as a percentage of net assets attributable to common stock):(4)

       

Operating expenses

 

5.92

%(5)(6)

Interest and fees paid in connection with borrowed funds

 

6.49

%(7)

Total annual expenses

 

12.41

%(8)

 


(1)

Represents the estimated commission with respect to the shares of common stock being sold in this offering. JMP Securities will be entitled to compensation up to 2.00% of the gross proceeds of the sale of any shares of our common stock under the Equity Distribution Agreement, with the exact amount of such compensation to be mutually agreed upon by the Company and JMP Securities from time to time. There is no guarantee that there will be any sales of our common stock pursuant to this prospectus supplement and the accompanying prospectus.

(2)

The percentage reflects estimated offering expenses of approximately $219,000, assuming all shares are offered under this prospectus supplement.

(3)

The expenses associated with the administration of our dividend reinvestment plan are included in “Operating expenses.” We pay all brokerage commissions incurred with respect to open market purchases, if any, made by the administrator under the plan. For more details about the plan, see “Dividend Reinvestment Plan” in the accompanying prospectus.

(4)

“Net assets attributable to common stock” equals the weighted average net assets for the three months ended March 31, 2019, which is approximately $959.5 million.

(5)

“Operating expenses” represents our estimated operating expenses by annualizing our actual operating expenses incurred for the three months ended March 31, 2019, including all fees and expenses of our consolidated subsidiaries and excluding interests and fees on indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Management,” and “Executive Compensation” in the accompanying prospectus.

(6)

We do not have an investment adviser and are internally managed by our executive officers under the supervision of our Board of Directors. As a result, we do not pay investment advisory fees, but instead we pay the operating costs associated with employing investment management professionals.

(7)

“Interest and fees paid in connection with borrowed funds” represents our estimated interest, fees and credit facility expenses by annualizing our actual interest, fees, and credit facility expenses incurred for the three months ended March 31, 2019, including our $75.0 million revolving senior secured credit facility with Wells Fargo Capital Finance, LLC, or the Wells Facility, $200.0 million revolving senior secured credit facility with MUFG Union Bank, N.A., or the Union Bank Facility, and, together with the Wells Facility, the Credit Facilities, 4.625% notes due 2022, or the 2022 Notes, 6.25% notes due 2024, or the 2024 Notes, 5.25% notes due 2025, or the 2025 Notes, 6.25% notes due 2033, or the 2033 Notes, 4.375% convertible notes due 2022, or the 2022 Convertible Notes, fixed rate asset-backed notes due 2027, or the 2027 Asset-Backed Notes, fixed rate asset-backed notes due 2028, or the 2028 Asset-Backed Notes, and the Small Business Administration, or SBA, debentures.

(8)

“Total annual expenses” is the sum of “operating expenses,” and “interest and fees paid in connection with borrowed funds.” “Total annual expenses” is presented as a percentage of weighted average net assets attributable to common stockholders because the holders of shares of our common stock (and not the holders of our debt securities or preferred stock, if any) bear all of our fees and expenses, including the fees and expenses of our wholly-owned consolidated subsidiaries, all of which are included in this fee table presentation.

 

 

Table of Contents

 

 

Example

 

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. These amounts are based upon our payment of annual operating expenses at the levels set forth in the table above and assume no additional leverage.

 

   

1 Year

   

3 Years

   

5 Years

   

10 Years

 

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return

  $ 138     $ 348     $ 529     $ 879  

 

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or lesser than those shown. Moreover, while the example assumes, as required by the applicable rules of the SEC, a 5% annual return, our performance will vary and may result in a return greater or lesser than 5%. In addition, while the example assumes reinvestment of all distributions at net asset value (“NAV”), participants in our dividend reinvestment plan may receive shares valued at the market price in effect at that time. This price may be at, above or below NAV. See “Dividend Reinvestment Plan” in the accompanying prospectus for additional information regarding our dividend reinvestment plan.

 

S-2

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FORWARD-LOOKING STATEMENTS

 

The matters discussed in this prospectus supplement, including the documents that we incorporate by reference herein, and the accompanying prospectus and any free writing prospectus, including the documents we incorporate by reference therein, as well as in future oral and written statements by management of Hercules Capital, Inc., that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus supplement and the accompanying prospectus should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this prospectus supplement, the accompanying prospectus, and any free writing prospectus include statements as to:

 

 

our current and future management structure;

 

 

our future operating results;

 

 

our business prospects and the prospects of our prospective portfolio companies;

 

 

the impact of investments that we expect to make;

 

 

our informal relationships with third parties including in the venture capital industry;

 

 

the expected market for venture capital investments and our addressable market;

 

 

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

 

our ability to access debt markets and equity markets;

 

 

the ability of our portfolio companies to achieve their objectives;

 

 

our expected financings and investments;

 

 

our regulatory structure and tax status;

 

 

our ability to operate as a business development company, or BDC, a small business investment company, or SBIC, and a regulated investment company, or RIC;

 

 

the adequacy of our cash resources and working capital;

 

 

the timing of cash flows, if any, from the operations of our portfolio companies;

 

 

the timing, form and amount of any distributions;

 

 

the impact of fluctuations in interest rates on our business;

 

 

the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

 

 

our ability to recover unrealized losses.

 

For a discussion of factors that could cause our actual results to differ from forward-looking statements contained in this prospectus supplement and the accompanying prospectus, please see the discussion under “Risk Factors” beginning on page S-11 of this prospectus supplement and on page 8 of the accompanying prospectus. You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this prospectus supplement, including the documents that we incorporate by reference herein, and the accompanying prospectus and any free writing prospectus, including the documents we incorporate by reference therein, relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this prospectus.

 

S-3

Table of Contents

 

 

INDUSTRY AND MARKET DATA

 

We have compiled certain industry estimates presented in this prospectus supplement, the accompanying prospectus, and any free writing prospectus from internally generated information and data. While we believe our estimates are reliable, they have not been verified by any independent sources. The estimates are based on a number of assumptions, including increasing investment in venture capital and private equity-backed companies. Actual results may differ from projections and estimates, and this market may not grow at the rates projected, or at all. If this market fails to grow at projected rates, our business and the market price of our securities, including our common stock, could be materially adversely affected.

 

 

S-4

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PROSPECTUS SUPPLEMENT SUMMARY

 

This summary highlights some of the information in this prospectus supplement and may not contain all of the information that is important to you. For a more complete understanding of this offering, we encourage you to read this entire prospectus supplement and the accompanying prospectus and the documents that are referenced in this prospectus supplement and the accompanying prospectus, together with any accompanying supplements. In this prospectus supplement and the accompanying prospectus, unless the context otherwise requires, the “Company,” “Hercules,” “HTGC,” “we,” “us” and “our” refer to Hercules Capital, Inc. and its wholly-owned subsidiaries and its affiliated securitization trusts.

 

Our Company

 

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences, and sustainable and renewable technology industries. Our investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments. We are an internally-managed, non-diversified, closed-end investment company that has elected to be regulated as a BDC under the 1940 Act. Effective January 1, 2006, we elected to be treated for tax purposes as a RIC under the Internal Revenue Code of 1986, as amended, or the Code.

 

As of March 31, 2019, our total assets were approximately $2.1 billion, of which our investments comprised $2.1 billion at fair value and $2.2 billion at cost. Since inception through March 31, 2019, we have made debt and equity commitments of more than $8.9 billion to our portfolio companies.

 

We also make investments in qualifying small businesses through Hercules Technology III, L.P., or HT III, which is our wholly owned SBIC. HT III holds approximately $314.5 million in assets which accounted for approximately 13.1% of our total assets, prior to consolidation at March 31, 2019. At March 31, 2019, we have issued $149.0 million in SBA-guaranteed debentures in our SBIC subsidiary. See “Regulation—Small Business Administration Regulations” in the accompanying prospectus for additional information regarding our SBIC subsidiary.

 

As of March 31, 2019, our investment professionals, including Scott Bluestein, our Interim Chief Executive Officer and Chief Investment Officer, are currently comprised of 37 professionals who have, on average, more than 10 years of experience in venture capital, structured finance, commercial lending or acquisition finance with the types of technology-related companies that we are targeting. We believe that we can leverage the experience and relationships of our management team to successfully identify attractive investment opportunities, underwrite prospective portfolio companies and structure customized financing solutions.

 

Organizational Chart

 

The following chart summarizes our organizational structure as of May 1, 2019. This chart is provided for illustrative purposes only.

 

 

S-5

Table of Contents

 

Our Market Opportunity

 

We believe that technology-related companies compete in one of the largest and most rapidly growing sectors of the U.S. economy and that continued growth is supported by ongoing innovation and performance improvements in technology products as well as the adoption of technology across virtually all industries in response to competitive pressures. We believe that an attractive market opportunity exists for a specialty finance company focused primarily on investments in structured debt with warrants in technology-related companies for the following reasons:

 

 

technology-related companies have generally been underserved by traditional lending sources;

 

 

unfulfilled demand exists for structured debt financing to technology-related companies due to the complexity of evaluating risk in these investments; and  

 

 

structured debt with warrants products are less dilutive and complement equity financing from venture capital and private equity funds.

 

Technology-Related Companies are Underserved by Traditional Lenders. We believe many viable technology-related companies backed by financial sponsors have been unable to obtain sufficient growth financing from traditional lenders, including financial services companies such as commercial banks and finance companies because traditional lenders have continued to consolidate and have adopted a more risk-averse approach to lending. More importantly, we believe traditional lenders are typically unable to underwrite the risk associated with these companies effectively.

 

S-6

Table of Contents

 

The unique cash flow characteristics of many technology-related companies typically include significant research and development expenditures and high projected revenue growth thus often making such companies difficult to evaluate from a credit perspective. In addition, the balance sheets of these companies often include a disproportionately large amount of intellectual property assets, which can be difficult to value. Finally, the speed of innovation in technology and rapid shifts in consumer demand and market share add to the difficulty in evaluating technology-related companies.

 

Due to the difficulties described above, we believe traditional lenders generally refrain from entering the structured debt financing marketplace, instead preferring the risk-reward profile of asset-based lending. Traditional lenders generally do not have flexible product offerings that meet the needs of technology-related companies. The financing products offered by traditional lenders typically impose on borrowers many restrictive covenants and conditions, including limiting cash outflows and requiring a significant depository relationship to facilitate rapid liquidation.

 

Unfulfilled Demand for Structured Debt Financing to Technology-Related Companies. Private debt capital in the form of structured debt financing from specialty finance companies continues to be an important source of funding for technology-related companies. We believe that the level of demand for structured debt financing is a function of the level of annual venture equity investment activity.

 

We believe that demand for structured debt financing is currently underserved. The venture capital market for the technology-related companies in which we invest has been active. Therefore, to the extent we have capital available, we believe this is an opportune time to be active in the structured lending market for technology-related companies.

 

Structured Debt with Warrants Products Complement Equity Financing From Venture Capital and Private Equity Funds. We believe that technology-related companies and their financial sponsors will continue to view structured debt securities as an attractive source of capital because it augments the capital provided by venture capital and private equity funds. We believe that our structured debt with warrants products provide access to growth capital that otherwise may only be available through incremental investments by existing equity investors. As such, we provide portfolio companies and their financial sponsors with an opportunity to diversify their capital sources. Generally, we believe many technology-related companies at all stages of development target a portion of their capital to be debt in an attempt to achieve a higher valuation through internal growth. In addition, because financial sponsor-backed companies have reached a more mature stage prior to reaching a liquidity event, we believe our investments could provide the debt capital needed to grow or recapitalize during the extended period sometimes required prior to liquidity events.  

 

Our Business Strategy

 

Our strategy to achieve our investment objective includes the following key elements:

 

Leverage the Experience and Industry Relationships of Our Management Team and Investment Professionals. We have assembled a team of experienced investment professionals with extensive experience as venture capitalists, commercial lenders, and originators of structured debt and equity investments in technology-related companies.

 

Mitigate Risk of Principal Loss and Build a Portfolio of Equity-Related Securities. We expect that our investments have the potential to produce attractive risk-adjusted returns through current income, in the form of interest and fee income, as well as capital appreciation from warrant and equity-related securities. We believe that we can mitigate the risk of loss on our debt investments through the combination of loan principal amortization, cash interest payments, relatively short maturities (typically between 24—48 months), security interests in the assets of our portfolio companies, and on select investment covenants requiring prospective portfolio companies to have certain amounts of available cash at the time of our investment and the continued support from a venture capital or private equity firm at the time we make our investment.

 

Provide Customized Financing Complementary to Financial Sponsors’ Capital. We offer a broad range of investment structures and possess expertise and experience to effectively structure and price investments in technology-related companies.

 

Invest at Various Stages of Development. We provide growth capital to technology-related companies at all stages of development, including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancings and established-stage companies.

 

Benefit from Our Efficient Organizational Structure. We believe that the perpetual nature of our corporate structure enables us to be a long-term partner for our portfolio companies in contrast to traditional investment funds, which typically have a limited life. In addition, because of our access to the equity markets, we believe that we may benefit from a lower cost of capital than that available to private investment funds.

 

S-7

Table of Contents

 

Deal Sourcing Through Our Proprietary Database. We have developed a proprietary and comprehensive structured query language-based database system to track various aspects of our investment process including sourcing, originations, transaction monitoring and post-investment performance.

 

Recent Developments

 

Distribution Declaration

 

On April 24, 2019, our Board of Directors declared a cash distribution of $0.32 per share to be paid on May 20, 2019 to stockholders of record as of May 13, 2019. This distribution represents our fifty-fifth consecutive distribution since our initial public offering, bringing the total cumulative distribution to date to $15.60 per share.

 

In addition to the cash distribution, on April 24, 2019, the Board of Directors declared a supplemental distribution of $0.01 per share to be paid on May 20, 2019 to stockholders of record as of May 13, 2019. The total cumulative distribution to date, including the supplemental distribution is $15.61 per share.

 

Closed and Pending Commitments

 

As of May 1, 2019, we have:

 

 

Closed debt and equity commitments of approximately $158.0 million to new and existing portfolio companies and funded approximately $78.9 million subsequent to March 31, 2019.

 

 

Pending commitments (signed non-binding term sheets) of approximately $146.2 million.  

 

The table below summarizes our year-to-date closed and pending commitments as follows:

 

Closed Commitments and Pending Commitments (in millions)

       

January 1—March 31, 2019 Closed Commitments(a)

  $ 414.9  

March 31—May 1, 2019 Closed Commitments(a)

  $ 158.0  

Pending Commitments (as of May 1, 2019)(b)

  $ 146.2  

Closed and Pending Commitments as of May 1, 2019

  $ 719.1  

 


a.

Closed Commitments may include renewals of existing credit facilities. Not all Closed Commitments result in future cash requirements. Commitments generally fund over the two succeeding quarters from close.

b.

Not all pending commitments (signed non-binding term sheets) are expected to close and they do not necessarily represent any future cash requirements.

 

Restricted Stock Unit Grants

 

During three months ended March 31, 2019, we granted 922,494 restricted stock units pursuant to the Hercules Capital, Inc. Amended and Restated 2018 Equity Incentive Plan, or the 2018 Equity Incentive Plan.

 

Share Repurchase Program

 

Subsequent to March 31, 2019 and as of May 1, 2019, we did not repurchase any shares of our common stock. As of May 1, 2019, approximately $20.9 million of common stock remains eligible for repurchase under the stock repurchase plan.

 

S-8

Table of Contents

 

Portfolio Company Developments

 

As of May 1, 2019, we held warrants or equity positions in five companies that have filed registration statements on Form S-1 with the SEC in contemplation of potential IPOs. Three companies filed confidentially under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. There can be no assurance that these companies will complete their IPOs in a timely manner or at all. In addition, subsequent to March 31, 2019, our portfolio companies announced or completed the following liquidity events:

 

 

In April 2019, Pinterest, Inc. (NYSE: PINS), a provider of a content sharing platform designed for collecting, organizing and sharing items from the web, completed its IPO offering of 75.0 million shares of Class A common stock at an initial public offering price of $19.00 per share on the New York Stock Exchange.

 

 

In April 2019, WildTangent, Inc., a game network that powers game services for several personal computer manufacturers, was acquired by gamigo AG, a Hamburg-based publisher of free-to-play online and mobile games in Europe and North America. Terms of the acquisition were not disclosed.

 

General Information

 

Our principal executive offices are located at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, and our telephone number is (650) 289-3060. We also have offices in Boston, MA, New York, NY, Washington, DC, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA. We maintain a website on the Internet at www.htgc.com. We make available, free of charge, on our website our proxy statement, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider that information to be part of this prospectus supplement or the accompanying prospectus.

 

We file annual, quarterly and current periodic reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In addition, the SEC maintains an Internet website, at www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers, including us, who file documents electronically with the SEC.

 

S-9

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THE OFFERING

 

Common stock offered by us

Up to 12,000,000 shares of our common stock.

 

Common stock outstanding prior to this offering

97,208,899 shares

 

Manner of offering

“At the market” offering that may be made from time to time through JMP Securities, as sales agent, using commercially reasonable efforts. See “Plan of Distribution” in this prospectus supplement.

 

Use of proceeds

We expect to use the net proceeds from this offering to fund investments in debt and equity securities in accordance with our investment objectives, to make acquisitions, to retire certain debt obligations, and for other general corporate purposes.

 

 

Pending such uses and investments, we will invest a portion of the net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. Our ability to achieve our investment objectives may be limited to the extent that the net proceeds of this offering, pending full investment, are held in lower yielding short-term instruments. See “Use of Proceeds” in this prospectus supplement.

 

Distribution

To the extent that we have income available, we intend to distribute quarterly distributions to our stockholders. The amount of our distributions, if any, will be determined by our Board of Directors. Any distributions to our stockholders will be declared out of assets legally available for distribution. See “Price Range of Common Stock” in this prospectus supplement.

 

Taxation

We have elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as distributions. To maintain our RIC tax status, we must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. See “Price Range of Common Stock” in this prospectus supplement and “Certain United States Federal Income Tax Considerations” in the accompanying prospectus.

 

New York Stock Exchange symbol

“HTGC”

 

Risk factors

An investment in our common stock is subject to risks and involves a heightened risk of total loss of investment. In addition, the companies in which we invest are subject to special risks. See “Risk Factors” beginning on page S-11 of this prospectus supplement and on page 8 of the accompanying prospectus to read about factors you should consider, including the risk of leverage, before investing in our common stock.

 

S-10

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RISK FACTORS

 

Investing in our securities may be speculative and involves a high degree of risk. You should carefully consider the risk factors incorporated by reference from our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K we file after the date of this prospectus supplement, and all other information contained or incorporated by reference into this prospectus supplement, the accompanying prospectus, and any free writing prospectus, as updated by our subsequent filings under the Exchange Act. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. Each of the risk factors could materially adversely affect our business, financial condition and results of operations. In such case, our NAV and the trading price of our securities could decline, and you may lose all or part of your investment.

 

S-11

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USE OF PROCEEDS

 

Overview

 

Sales of our common stock, if any, under this prospectus supplement and the accompanying prospectus 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 sales made to or through a market maker other than on an exchange. There is no guarantee that there will be any sales of our common stock pursuant to this prospectus supplement and the accompanying prospectus. Actual sales, if any, of our common stock under this prospectus supplement and the accompanying prospectus may be less than as set forth in this paragraph depending on, among other things, the market price of our common stock at the time of any such sale. As a result, the actual net proceeds we receive may be more or less than the amount of net proceeds estimated in this prospectus supplement. Assuming the sale of the remaining 12,000,000 shares of common stock offered under this prospectus supplement and the accompanying prospectus, at the last reported sale price of $12.93 per share for our common stock on the NYSE as of May 1, 2019, we estimate that the net proceeds of this offering will be approximately $151.8 million after deducting the estimated sales commission payable to JMP Securities and our estimated offering expenses.

 

We intend to use the net proceeds from this offering to fund investments in debt and equity securities in accordance with our investment objectives, to make acquisitions, to retire certain debt obligations and for other general corporate purposes.

 

We intend to seek to invest the net proceeds received in this offering as promptly as practicable after receipt thereof consistent with our investment objective. We anticipate that substantially all of the net proceeds from any offering of our securities will be used as described above within three to six months, depending on market conditions. We anticipate that the remainder will be used for working capital and general corporate purposes, including potential payments or distributions to shareholders. Pending such uses and investments, we will invest a portion of the net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. Our ability to achieve our investment objectives may be limited to the extent that the net proceeds of this offering, pending full investment, are held in lower yielding short-term instruments. 

 

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PRICE RANGE OF COMMON STOCK

 

Our common stock is traded on the NYSE under the symbol “HTGC.”

 

The following table sets forth the range of high and low sales prices of our common stock, the sales price as a percentage of NAV and the distributions declared by us for each fiscal quarter. The stock quotations are interdealer quotations and do not include markups, markdowns or commissions.

 

           

Price Range

   

Premium/
Discount of
High Sales

   

Premium/
Discount of
Low Sales

   

Cash
Distribution

 
   

NAV(1)

   

High

   

Low

    Price to NAV     Price to NAV     per Share  

2017

                                               

First quarter

  $ 9.76     $ 15.43     $ 14.12       58.1 %     44.7 %   $ 0.310  

Second quarter

  $ 9.87     $ 15.56     $ 12.66       57.6 %     28.3 %   $ 0.310  

Third quarter

  $ 10.00     $ 13.50     $ 12.04       35.0 %     20.4 %   $ 0.310  

Fourth quarter

  $ 9.96     $ 13.94     $ 12.44       39.9 %     24.9 %   $ 0.310  

2018

                                               

First quarter

  $ 9.72     $ 13.25     $ 11.89       36.3 %     22.3 %   $ 0.310  

Second quarter

  $ 10.22     $ 12.97     $ 11.99       26.9 %     17.3 %   $ 0.310  

Third quarter

  $ 10.38     $ 13.64     $ 12.71       31.4 %     22.4 %   $ 0.330 (2) 

Fourth quarter

  $ 9.90     $ 13.28     $ 10.63       34.1 %     7.4 %   $ 0.310  

2019

                                               

First quarter

  $ 10.26     $ 14.04     $ 11.23       36.8 %     9.5 %   $ 0.330 (3) 

Second quarter (through May 1, 2019)

     *     $ 13.08     $ 12.57        *        *        **  

 


(1)

NAV per share is generally determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.

(2)

Includes a supplemental distribution of $0.02 per share.

(3)

Includes a supplemental distribution of $0.01 per share.

*

NAV has not yet been calculated for this period.

**

Cash distribution per share has not yet been determined for this period.

 

The last reported price for our common stock on May 1, 2019 was $12.93 per share.

 

Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV will decrease. At times, our shares of common stock have traded at a premium to NAV and at times our shares of common stock have traded at a discount to the net assets attributable to those shares. It is not possible to predict whether the shares offered hereby will trade at, above, or below NAV

 

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CAPITALIZATION

 

The Equity Distribution Agreement provides that we may offer and sell up to 12,000,000 shares of our common stock from time to time through JMP Securities, as our sales agent for the offer and sale of such common stock. The table below assumes that we will sell the remaining 12,000,000 shares at a price of $12.93 per share (the last reported sale price per share of our common stock on the NYSE on May 1, 2019), but there is no guarantee that there will be any sales of our common stock pursuant to this prospectus supplement and the accompanying prospectus. Actual sales, if any, of our common stock under this prospectus supplement and the accompanying prospectus may be less than as set forth in the table below. In addition, the price per share of any such sale may be greater or less than $12.93 depending on the market price of our common stock at the time of any such sale. The following table sets forth our capitalization as of March 31, 2019:

 

 

on an actual basis; and

 

 

on an as adjusted basis giving effect to the transactions noted above, no additional sale of shares of common stock subsequent to March 31, 2019 and as of May 1, 2019, and the assumed sale of 12,000,000 shares of our common stock at a price of $12.93 per share (the last reported sale price per share of our common stock on the NYSE on May 1, 2019) less commissions and expenses.

 

This table should be read in conjunction with “Use of Proceeds” included in this prospectus supplement and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes thereto included in the accompanying prospectus. The adjusted information is illustrative only.

 

   

As of March 31, 2018

 
   

Actual

   

As
Adjusted

 
   

(in thousands)

 

Investments at fair value

  $ 2,081,042     $ 2,081,042  

Cash and cash equivalents

  $ 16,465    

$

168,303  

Debt:

               

Accounts payable and accrued liabilities

  $ 18,256     $ 18,256  

Operating lease liability

    8,856       8,856  

Long-term SBA debentures

    147,783       147,783  

2022 Convertible Notes

    225,441       225,441  

2027 Asset-Backed Notes

    197,102       197,102  

2028 Asset-Backed Notes

    247,352       247,352  

2022 Notes

    148,121       148,121  

2025 Notes

    72,685       72,685  

2033 Notes

    38,420       38,420  

Credit Facilities

    44,266       44,266  

Total debt

  $ 1,148,282     $ 1,148,282  

Stockholders’ equity:

               

Common stock, par value $0.001 per share; 200,000,000 shares authorized; 96,543,343 shares issued and outstanding, actual, 108,543,343 shares issued and outstanding, as adjusted, respectively

  $ 96    

$

108  

Capital in excess of par value

    1,051,427    

 

1,203,253  

Total distributable earnings (loss)

    (61,174 )     (61,174 )

Treasury Stock, at cost, no shares as of March 31, 2019

 

   

 

Total stockholders’ equity

  $ 990,349    

$

1,142,187  

Total capitalization

  $ 2,138,631    

$

2,290,469  

 

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PLAN OF DISTRIBUTION

 

JMP Securities LLC is acting as our sales agent in connection with the offer and sale of shares of our common stock pursuant to this prospectus supplement and the accompanying prospectus. Upon written instructions from us, JMP Securities LLC will use its commercially reasonable efforts consistent with its sales and trading practices to sell, as our sales agent, our common stock under the terms and subject to the conditions set forth in the Equity Distribution Agreement. We will instruct JMP Securities LLC as to the amount of common stock to be sold by it. We may instruct JMP Securities LLC not to sell common stock if the sales cannot be effected at or above the price designated by us in any instruction. The sales price per share of our common stock offered by this prospectus supplement and the accompanying prospectus, less JMP Securities LLC’s commission, will not be less than the NAV per share of our common stock at the time of such sale. We or JMP Securities LLC may suspend the offering of shares of common stock upon proper notice and subject to other conditions.

 

Sales of our common stock, if any, under this prospectus supplement and the accompanying prospectus 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.

 

JMP Securities LLC will provide written confirmation of a sale to us no later than the opening of the trading day on the NYSE following each trading day in which shares of our common stock are sold under the Equity Distribution Agreement. Each confirmation will include the number of shares of common stock sold on the preceding day, the net proceeds to us and the compensation payable by us to JMP Securities LLC in connection with the sales.

 

JMP Securities LLC will receive a commission from us to be negotiated from time to time but in no event in excess of 2.0% of the gross sales price of any shares of our common stock sold through JMP Securities LLC under the Equity Distribution Agreement. We estimate that the total expenses for the offering, excluding compensation payable to JMP Securities LLC under the terms of the Equity Distribution Agreement, will be approximately $219,000 assuming all shares are offered under this prospectus supplement (including up to $10,000 in reimbursement of the underwriters’ counsel fees in connection with the review of the terms of the offering by the Financial Industry Regulatory Authority, Inc.).

 

Settlement for sales of shares of common stock will occur on the second trading day following the date on which such sales are made, or on some other date that is agreed upon by us and JMP Securities LLC in connection with a particular transaction, in return for payment of the net proceeds to us. There is no arrangement for funds to be received in an escrow, trust or similar arrangement.

 

We will report at least quarterly the number of shares of our common stock sold through JMP Securities LLC under the Equity Distribution Agreement and the net proceeds to us.

 

In connection with the sale of the common stock on our behalf, JMP Securities LLC may be deemed to be an “underwriter” within the meaning of the Securities Act, and the compensation of JMP Securities LLC may be deemed to be underwriting commissions or discounts. We have agreed to provide indemnification and contribution to JMP Securities LLC against certain civil liabilities, including liabilities under the Securities Act.

 

The offering of our shares of common stock pursuant to the Equity Distribution Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Equity Distribution Agreement or (ii) the termination of the Equity Distribution Agreement. The Equity Distribution Agreement may be terminated by us in our sole discretion under the circumstances specified in the Equity Distribution Agreement by giving notice to JMP Securities LLC. In addition, JMP Securities LLC may terminate the Equity Distribution Agreement under the circumstances specified in the Equity Distribution Agreement by giving notice to us.

 

Potential Conflicts of Interest

 

JMP Securities LLC and its affiliates have provided, or may in the future provide, various investment banking, commercial banking, financial advisory, brokerage and other services to us and our affiliates for which services they have received, and may in the future receive, customary fees and expense reimbursement. JMP Securities LLC and its affiliates may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In the ordinary course of their various business activities, JMP Securities LLC and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and such investment and securities activities may involve securities and/or instruments of our company.

 

The principal business address of JMP Securities LLC is 600 Montgomery Street, San Francisco, CA 94111.

 

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SENIOR SECURITIES

 

Information about our senior securities is shown in the following table for the periods as of December 31, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, and 2009. The information as of December 31, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011 and 2010 has been derived from our audited financial statements for these periods, which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The report of PricewaterhouseCoopers LLP on the senior securities table as of December 31, 2018 is attached as an exhibit to the registration statement of which this prospectus is a part. The “N/A” indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

 

Class and Year

 

Total Amount
Outstanding
Exclusive of
Treasury Securities
(1)

   

Asset Coverage
per Unit
(2)

   

Average
Market
Value
per Unit
(3)

 

Securitized Credit Facility with Wells Fargo Capital Finance

                       

December 31, 2009(6)

                N/A  

December 31, 2010(6)

                N/A  

December 31, 2011

  $ 10,186,830     $ 73,369       N/A  

December 31, 2012(6)

                N/A  

December 31, 2013(6)

                N/A  

December 31, 2014(6)

                N/A  

December 31, 2015

  $ 50,000,000     $ 26,352       N/A  

December 31, 2016

  $ 5,015,620     $ 290,234       N/A  

December 31, 2017(6)

                N/A  

December 31, 2018

  $ 13,106,582     $ 147,497       N/A  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 4,583,209     $ 462,897       N/A  

Securitized Credit Facility with Union Bank, NA

                       

December 31, 2009(6)

                N/A  

December 31, 2010(6)

                N/A  

December 31, 2011(6)

                N/A  

December 31, 2012(6)

                N/A  

December 31, 2013(6)

                N/A  

December 31, 2014(6)

                N/A  

December 31, 2015(6)

                N/A  

December 31, 2016(6)

                N/A  

December 31, 2017(6)

                N/A  

December 31, 2018

  $ 39,849,010     $ 48,513       N/A  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 39,682,973     $ 53,463       N/A  

Small Business Administration Debentures (HT II)(4)

                       

December 31, 2009

  $ 130,600,000     $ 3,806       N/A  

December 31, 2010

  $ 150,000,000     $ 3,942       N/A  

December 31, 2011

  $ 125,000,000     $ 5,979       N/A  

December 31, 2012

  $ 76,000,000     $ 14,786       N/A  

December 31, 2013

  $ 76,000,000     $ 16,075       N/A  

December 31, 2014

  $ 41,200,000     $ 31,535       N/A  

December 31, 2015

  $ 41,200,000     $ 31,981       N/A  

December 31, 2016

  $ 41,200,000     $ 35,333       N/A  

December 31, 2017

  $ 41,200,000     $ 39,814       N/A  

December 31, 2018

                N/A  

Small Business Administration Debentures (HT III)(5)

                       

December 31, 2010

  $ 20,000,000     $ 29,564       N/A  

December 31, 2011

  $ 100,000,000     $ 7,474       N/A  

December 31, 2012

  $ 149,000,000     $ 7,542       N/A  

December 31, 2013

  $ 149,000,000     $ 8,199       N/A  

December 31, 2014

  $ 149,000,000     $ 8,720       N/A  

December 31, 2015

  $ 149,000,000     $ 8,843       N/A  

December 31, 2016

  $ 149,000,000     $ 9,770       N/A  

December 31, 2017

  $ 149,000,000     $ 11,009       N/A  

December 31, 2018

  $ 149,000,000     $ 12,974       N/A  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 149,000,000     $ 14,239       N/A  

 

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Class and Year

 

Total Amount
Outstanding
Exclusive of
Treasury Securities
(1)

   

Asset Coverage
per Unit
(2)

   

Average
Market
Value
per Unit
(3)

 

2016 Convertible Notes

                       

December 31, 2011

  $ 75,000,000     $ 10,623     $ 885  

December 31, 2012

  $ 75,000,000     $ 15,731     $ 1,038  

December 31, 2013

  $ 75,000,000     $ 16,847     $ 1,403  

December 31, 2014

  $ 17,674,000     $ 74,905     $ 1,290  

December 31, 2015

  $ 17,604,000     $ 74,847     $ 1,110  

December 31, 2016

                 

April 2019 Notes

                       

December 31, 2012

  $ 84,489,500     $ 13,300     $ 986  

December 31, 2013

  $ 84,489,500     $ 14,460     $ 1,021  

December 31, 2014

  $ 84,489,500     $ 15,377     $ 1,023  

December 31, 2015

  $ 64,489,500     $ 20,431     $ 1,017  

December 31, 2016

  $ 64,489,500     $ 22,573     $ 1,022  

December 31, 2017

                 

September 2019 Notes

                       

December 31, 2012

  $ 85,875,000     $ 13,086     $ 1,003  

December 31, 2013

  $ 85,875,000     $ 14,227     $ 1,016  

December 31, 2014

  $ 85,875,000     $ 15,129     $ 1,026  

December 31, 2015

  $ 45,875,000     $ 28,722     $ 1,009  

December 31, 2016

  $ 45,875,000     $ 31,732     $ 1,023  

December 31, 2017

                 

2022 Notes

                       

December 31, 2017

  $ 150,000,000     $ 10,935     $ 1,014  

December 31, 2018

  $ 150,000,000     $ 12,888     $ 976  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 150,000,000     $ 14,144     $ 979  

2024 Notes

                       

December 31, 2014

  $ 103,000,000     $ 12,614     $ 1,010  

December 31, 2015

  $ 103,000,000     $ 12,792     $ 1,014  

December 31, 2016

  $ 252,873,175     $ 5,757     $ 1,016  

December 31, 2017

  $ 183,509,600     $ 8,939     $ 1,025  

December 31, 2018

  $ 83,509,600     $ 23,149     $ 1,011  

December 31, 2019 (as of March 31, 2019, unaudited)

                 

2025 Notes

                       

December 31, 2018

  $ 75,000,000     $ 25,776     $ 962  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 75,000,000     $ 28,287     $ 995  

2033 Notes

                       

December 31, 2018

  $ 40,000,000     $ 48,330     $ 934  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 40,000,000     $ 53,039     $ 995  

2017 Asset-Backed Notes

                       

December 31, 2012

  $ 129,300,000     $ 8,691     $ 1,000  

December 31, 2013

  $ 89,556,972     $ 13,642     $ 1,004  

December 31, 2014

  $ 16,049,144     $ 80,953     $ 1,375  

December 31, 2015

                 

2021 Asset-Backed Notes

                       

December 31, 2014

  $ 129,300,000     $ 10,048     $ 1,000  

December 31, 2015

  $ 129,300,000     $ 10,190     $ 996  

December 31, 2016

  $ 109,205,263     $ 13,330     $ 1,002  

December 31, 2017

  $ 49,152,504     $ 33,372     $ 1,001  

December 31, 2018

                 

2027 Asset-Backed Notes

                       

December 31, 2018

  $ 200,000,000     $ 9,666     $ 1,006  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 200,000,000     $ 10,608     $ 1,016  

2028 Asset-Backed Notes

                       

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 250,000,000     $ 8,486     $ 1,013  

2022 Convertible Notes

                       

December 31, 2017

  $ 230,000,000     $ 7,132     $ 1,028  

December 31, 2018

  $ 230,000,000     $ 8,405     $ 946  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 230,000,000     $ 9,224     $ 977  

 

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Class and Year

 

Total Amount
Outstanding
Exclusive of
Treasury Securities
(1)

   

Asset Coverage
per Unit
(2)

   

Average
Market
Value
per Unit
(3)

 

Total Senior Securities(7)

                       

December 31, 2009

  $ 130,600,000     $ 3,806       N/A  

December 31, 2010

  $ 170,000,000     $ 3,478       N/A  

December 31, 2011

  $ 310,186,830     $ 2,409       N/A  

December 31, 2012

  $ 599,664,500     $ 1,874       N/A  

December 31, 2013

  $ 559,921,472     $ 2,182       N/A  

December 31, 2014

  $ 626,587,644     $ 2,073       N/A  

December 31, 2015

  $ 600,468,500     $ 2,194       N/A  

December 31, 2016

  $ 667,658,558     $ 2,180       N/A  

December 31, 2017

  $ 802,862,104     $ 2,043       N/A  

December 31, 2018

  $ 980,465,192     $ 1,972       N/A  

December 31, 2019 (as of March 31, 2019, unaudited)

  $ 1,138,266,182     $ 1,864       N/A  

 


(1)

Total amount of each class of senior securities outstanding at the end of the period presented.

(2)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, including senior securities not subject to asset coverage requirements under the 1940 Act due to exemptive relief from the SEC, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage per Unit.

(3)

Not applicable because senior securities are not registered for public trading.

(4)

Issued by HT II, one of our prior SBIC subsidiaries, to the SBA. On July 13, 2018, we completed repayment of the remaining outstanding HT II debentures and subsequently surrendered the SBA license with respect to HT II. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.

(5)

Issued by HT III, our SBIC subsidiary, to the SBA. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.

(6)

The Company’s Wells Facility and Union Bank Facility had no borrowings outstanding during the periods noted above.

(7)

The total senior securities and Asset Coverage per Unit shown for those securities do not represent the asset coverage ratio requirement under the 1940 Act because the presentation includes senior securities not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC. As of March 31, 2019, our asset coverage ratio under our regulatory requirements as a BDC was 199.4% excluding our SBA debentures as a result of our exemptive order from the SEC which allows us to exclude all SBA leverage from our asset coverage ratio.

 

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LEGAL MATTERS

 

Certain legal matters in connection with the securities offered hereby will be passed upon for us by Dechert LLP, New York, NY. Certain legal matters in connection with the securities offered hereby will be passed upon for JMP Securities by Skadden, Arps, Slate, Meagher & Flom LLP.

 

EXPERTS

 

The consolidated financial statements as of December 31, 2018 and December 31, 2017 and for each of the three years in the period ended December 31, 2018 and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report on Internal Control over Financial Reporting) as of December 31, 2018 have been incorporated by reference herein and in the registration statement in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, located at Three Embarcadero Center, San Francisco, California 94111, given on the authority of said firm as experts in auditing and accounting.

 

INCORPORATION BY REFERENCE

 

This prospectus supplement is part of a registration statement that we have filed with the SEC. Pursuant to the Small Business Credit Availability Act, we are allowed to “incorporate by reference” the information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus supplement, and later information that we file with the SEC will automatically update and supersede this information.

 

We incorporate by reference the documents listed below and any future filings (including those made after the date of the filing of the registration statement of which this prospectus is a part) we will make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act until the termination of the offering of the securities covered by this prospectus; provided, however, that information “furnished” under Item 2.02 or Item 7.01 of Form 8-K or other information “furnished” to the SEC which is not deemed filed is not incorporated by reference:

 

 

our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 21, 2019;

     
  our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed with the SEC on May 2, 2019;

 

 

our Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 24, 2019;

 

 

our Current Reports on Form 8-K (other than information furnished rather than filed) filed with the SEC on January 7, 2019, January 15, 2019, January 17, 2019, January 22, 2019, January 31, 2019, February 5, 2019, February 12, 2019, and March 14, 2019; and

 

 

The description of our Common Stock referenced in our Registration Statement on Form 8-A (No. 001-35515), as filed with the SEC on April 17, 2012, including any amendment or report filed for the purpose of updating such description prior to the termination of the offering of the common stock registered hereby;

 

These documents may also be accessed on our website at www.htgc.com. Information contained in, or accessible through, our website is not a part of this prospectus supplement.

 

You may request a copy of these filings (other than exhibits, unless the exhibits are specifically incorporated by reference into these documents) at no cost by writing or calling Investor Relations at the following address and telephone number:

 

Hercules Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, California 94301

(650) 433-5578

 

AVAILABLE INFORMATION

 

We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to our securities offered by this prospectus supplement and the accompanying prospectus. The registration statement contains additional information about us and our securities being offered by this prospectus supplement and the accompanying prospectus.

 

S-19

Table of Contents

 

We file annual, quarterly and current periodic reports, proxy statements and other information with the SEC under the Exchange Act. The SEC maintains an Internet website that contains reports, proxy and information statements and other information filed electronically by us with the SEC which are available on the SEC’s Internet website at http://www.sec.gov. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov.

 

We maintain a website on the Internet at www.htgc.com. Except for the documents incorporated by reference into this prospectus supplement and the accompanying prospectus, the information on our website is not part of this prospectus supplement or the accompanying prospectus. We make available, free of charge, on our website our proxy statement, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

 

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PROSPECTUS

 

$850,000,000

 

 

 

Common Stock

Preferred Stock

Warrants

Subscription Rights

Debt Securities

 

This prospectus relates to the offer, from time to time, in one or more offerings or series, up to $850,000,000 of shares of our common stock, par value $0.001 per share, preferred stock, par value $0.001 per share, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, subscription rights or debt securities, which we refer to, collectively, as the “securities.” The preferred stock, debt securities, subscription rights and warrants offered hereby may be convertible or exchangeable into shares of our common stock. We may sell our securities through underwriters or dealers, “at-the-market” to or through a market maker into an existing trading market or otherwise directly to one or more purchasers, including existing stockholders in a rights offering, or through agents or through a combination of methods of sale, including auctions. The identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements to this prospectus. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus.

 

In the event we offer common stock, the offering price per share will not be less than the net asset value per share of our common stock at the time we make the offering except (1) in connection with a rights offering to our existing stockholders, (2) with the consent of the holders of the majority of our voting securities and approval of our Board of Directors, or (3) under such circumstances as the Securities and Exchange Commission may permit. See “Risk Factors” for more information.

 

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences and sustainable and renewable technology industries. We primarily finance privately-held companies backed by leading venture capital and private equity firms and publicly-traded companies that lack access to public capital or are sensitive to equity ownership dilution. We source our investments through our principal office located in Palo Alto, CA, as well as through additional offices in Boston, MA, New York, NY, Washington, DC, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA. Our goal is to be the leading structured debt financing provider for venture capital-backed companies in technology-related industries requiring sophisticated and customized financing solutions. We invest primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. We use the term “structured debt with warrants” to refer to any debt investment, such as a senior or subordinated secured loan, that is coupled with an equity component, including warrants, options or other rights to purchase common or preferred stock. Our structured debt with warrants investments typically are secured by some or all of the assets of the portfolio company. We invest primarily in private companies but also have investments in public companies.

 

Our investment objective is to maximize our portfolio total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments. We are an internally-managed, non-diversified closed-end investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.

 

Our common stock is traded on the New York Stock Exchange, or NYSE, under the symbol “HTGC.” On April 23, 2019, the last reported sale price of a share of our common stock on the NYSE, was $12.83. The net asset value per share of our common stock at December 31, 2018 (the last date prior to the date of this prospectus on which we determined net asset value) was $9.90.

 


 

An investment in our securities may be speculative and involves risks including a heightened risk of total loss of investment. In addition, the companies in which we invest are subject to special risks. See “Risk Factors” on page 8 of this prospectus, in our most recent Annual Report on Form 10-K, in any of our other filings with the Securities and Exchange Commission, and in any applicable prospectus supplement and in any free writing prospectus to read about risks that you should consider before investing in our securities, including the risk of leverage.

 

Please read this prospectus and any free writing prospectus before investing and keep it for future reference. It contains important information about us that a prospective investor ought to know before investing in our securities. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. The information is available free of charge by contacting us at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301 or by telephone calling collect at (650) 289-3060 or on our website at www.htgc.com. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information.

 


 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

This prospectus may not be used to consummate sales of any securities unless accompanied by a prospectus supplement.

 

The date of this prospectus is April 29, 2019

 

 

Table of Contents

 

 

 

You should rely only on the information contained in this prospectus, any applicable prospectus supplement, any free writing prospectus, the documents incorporated by reference in this prospectus and any applicable prospectus supplement, or any other information which we have referred you. We have not authorized any dealer, salesperson or other person to provide you with different information or to make representations as to matters not stated in this prospectus or in any free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any applicable prospectus supplement, and any free writing prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any securities by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information in this prospectus, any applicable prospectus supplement, and any free writing prospectus is accurate only as of its date, and under no circumstances should the delivery of this prospectus, any applicable prospectus supplement, or any free writing prospectus or the sale of any securities imply that the information in this prospectus, any applicable prospectus supplement, or any free writing prospectus is accurate as of any later date or that the affairs of Hercules Capital, Inc. have not changed since the date hereof. This prospectus will be updated to reflect material changes.

 


 

TABLE OF CONTENTS

 

 

Page

Hercules Capital, Inc.

6

Fees and Expenses

7

Risk Factors 8

Forward-Looking Statements

9

Use of Proceeds

10

Price Range of Common Stock and Distributions

11

Portfolio Companies

12

Senior Securities

29

Certain United States Federal Income Tax Considerations

32

Sales of Common Stock Below Net Asset Value

40

Dividend Reinvestment Plan

44

Description of Capital Stock

45

Description of Our Preferred Stock

50

Description of Our Subscription Rights

51

Description of Warrants

53

Description of Our Debt Securities

55

Plan of Distribution

66

Custodian, Transfer and Dividend Paying Agent and Registrar

67

Legal Matters

67

Experts

67

Incorporation By Reference

68

Available Information

68

 


 

Hercules Capital, Inc., our logo and other trademarks of Hercules Capital, Inc. mentioned in this prospectus are the property of Hercules Capital, Inc. All other trademarks or trade names referred to in this prospectus are the property of their respective owners.

 

 

Table of Contents

 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission using the “shelf” registration process as a “well-known seasoned issuer,” as defined in Rule 405 under the Securities Act of 1933, as amended, or the Securities Act. Under the shelf registration process, which constitutes a delayed offering in reliance on Rule 415 under the Securities Act, we may offer, from time to time, up to $850,000,000 of our common stock, preferred stock, warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, subscription rights or debt securities on the terms to be determined at the time of the offering. We may sell our securities through underwriters or dealers, “at-the-market” to or through a market maker, into an existing trading market or otherwise directly to one or more purchasers, including existing stockholders in a rights offering, or through agents or through a combination of methods of sale. The identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements to this prospectus. The securities may be offered at prices and on terms described in one or more supplements to this prospectus. This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. Please carefully read this prospectus and any such supplements together with the additional information described under “Incorporation by Reference” and “Available Information” sections before you make an investment decision.

 

A prospectus supplement may also add to, update or change information contained in this prospectus.

 

In this prospectus, unless the context otherwise requires, the “Company,” “Hercules,” “HTGC,” “we,” “us” and “our” refer to Hercules Capital, Inc. and its wholly owned subsidiaries and its affiliated securitization trusts.

 

 

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HERCULES CAPITAL, INC.

 

Business Overview

 

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences and sustainable and renewable technology industries. We source our investments through our principal office located in Palo Alto, CA, as well as through our additional offices in Boston, MA, New York, NY, Washington, DC, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA.

 

Our goal is to be the leading structured debt financing provider for venture capital-backed companies in technology-related industries requiring sophisticated and customized financing solutions. Our strategy is to evaluate and invest in a broad range of technology-related industries including technology, drug discovery and development, biotechnology, life sciences, healthcare, and sustainable and renewable technology and to offer a full suite of growth capital products. We focus our investments in companies active in the technology industry sub-sectors characterized by products or services that require advanced technologies, including, but not limited to, computer software and hardware, networking systems, semiconductors, semiconductor capital equipment, information technology infrastructure or services, internet consumer and business services, telecommunications, telecommunications equipment, renewable or alternative energy, media and life sciences. Within the life sciences sub-sector, we generally focus on medical devices, bio-pharmaceutical, drug discovery, drug delivery, health care services and information systems companies. Within the sustainable and renewable technology sub-sector, we focus on sustainable and renewable energy technologies and energy efficiency and monitoring technologies. We refer to all of these companies as “technology-related” companies and intend, under normal circumstances, to invest at least 80% of the value of our total assets in such businesses.

 

We invest primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. We invest primarily in private companies but also have investments in public companies. We use the term “structured debt with warrants” to refer to any debt investment, such as a senior or subordinated secured loan, that is coupled with an equity component, including warrants, options or other rights to purchase common or preferred stock. Our structured debt with warrants investments typically are secured by some or all of the assets of the portfolio company. We also provide “unitranche” loans, which are loans that combine both senior and mezzanine debt, generally in a first lien position.

 

Our investment objective is to maximize our portfolio total return by generating current income from our debt investments and capital appreciation from our warrant and equity-related investments. Our primary business objectives are to increase our net income, net operating income and net asset value, or NAV, by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. Our equity ownership in our portfolio companies may exceed 25% of the voting securities of such companies, which represents a controlling interest under the Investment Company Act of 1940, as amended, or the 1940 Act. In some cases, we receive the right to make additional equity investments in our portfolio companies in connection with future equity financing rounds. Capital that we provide directly to venture capital-backed companies in technology-related industries is generally used for growth and general working capital purposes as well as in select cases for acquisitions or recapitalizations.

 

Corporate Information

 

 

 

We are an internally-managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company, or a BDC, under the 1940 Act. Effective January 1, 2006, we elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended, or the Code.

 

We are a Maryland corporation formed in December 2003 that began investment operations in September 2004. On February 25, 2016, we changed our name from “Hercules Technology Growth Capital, Inc.” to “Hercules Capital, Inc.”

 

Our principal executive offices are located at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, and our telephone number is (650) 289-3060.

 

 

Table of Contents

 

FEES AND EXPENSES

 

The following table is intended to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The footnotes to the fee table state which items are estimates. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Hercules Capital, Inc.

 

Stockholder Transaction Expenses (as a percentage of the public offering price):

       

Sales load (as a percentage of offering price)(1)

    %

Offering expenses

    %(2)

Dividend reinvestment plan fees

    %(3)

Total stockholder transaction expenses (as a percentage of the public offering price)

    %(4)

Annual Expenses (as a percentage of net assets attributable to common stock):(5)

       

Operating expenses

    5.67 %(6)(7)

Interest and fees paid in connection with borrowed funds

    5.06 %(8)

Total annual expenses

    10.73 %(9)

 


(1)

In the event that our securities are sold to or through underwriters, a corresponding prospectus supplement to this prospectus will disclose the applicable sales load.

(2)

In the event that we conduct an offering of our securities, a corresponding prospectus supplement to this prospectus will disclose the estimated offering expenses.

(3)

The expenses associated with the administration of our dividend reinvestment plan are included in “Operating expenses.” We pay all brokerage commissions incurred with respect to open market purchases, if any, made by the administrator under the plan. For more details about the plan, see “Dividend Reinvestment Plan.”

(4)

Total stockholder transaction expenses may include sales load and will be disclosed in a future prospectus supplement, if any.

(5)

“Net assets attributable to common stock” equals the weighted average net assets for the year ended December 31, 2018, which is approximately $923.1 million.

(6)

“Operating expenses” represents our actual operating expenses incurred for the year ended December 31, 2018, including all fees and expenses of our consolidated subsidiaries and excluding interests and fees on indebtedness.

(7)

We do not have an investment adviser and are internally managed by our executive officers under the supervision of our Board of Directors. As a result, we do not pay investment advisory fees, but instead we pay the operating costs associated with employing investment management professionals.

(8)

“Interest and fees paid in connection with borrowed funds” represents our estimated interest, fees and credit facility expenses by annualizing our actual interest, fees and credit facility expenses incurred for the year ended December 31, 2018, including our then $75.0 million revolving senior secured credit facility with Wells Fargo Capital Finance, LLC, or the Wells Facility, then $100.0 million revolving senior secured credit facility with MUFG Union Bank, N.A., or the Union Bank Facility, and, together with the Wells Facility, the Credit Facilities, 4.625% notes due 2022, or the 2022 Notes, 6.25% notes due 2024, or the 2024 Notes, 5.25% notes due 2025, or the 2025 Notes, 6.25% notes due 2033, or the 2033 Notes, 4.375% convertible notes due 2022, or the 2022 Convertible Notes, fixed rate asset-backed notes due 2021, or the 2021 Asset-Backed Notes, fixed rate asset-backed notes due 2027, or the 2027 Asset-Backed Notes, and the Small Business Administration, or SBA, debentures.

(9)

“Total annual expenses” is the sum of “operating expenses,” and “interest and fees paid in connection with borrowed funds.” “Total annual expenses” is presented as a percentage of weighted average net assets attributable to common stockholders because the holders of shares of our common stock (and not the holders of our debt securities or preferred stock, if any) bear all of our fees and expenses, including the fees and expenses of our wholly-owned consolidated subsidiaries, all of which are included in this fee table presentation.

 

 

Example

 

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. These amounts are based upon our payment of annual operating expenses at the levels set forth in the table above and assume no additional leverage.

 

   

1 Year

   

3 Years

   

5 Years

   

10 Years

 

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return

  $ 130     $ 316     $ 482     $ 822  

 

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or lesser than those shown. Moreover, while the example assumes, as required by the applicable rules of the SEC, a 5% annual return, our performance will vary and may result in a return greater or lesser than 5%. In addition, while the example assumes reinvestment of all distributions at NAV, participants in our dividend reinvestment plan may receive shares valued at the market price in effect at that time. This price may be at, above or below NAV. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

 

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Table of Contents

 

 

RISK FACTORS

 

Investing in our securities may be speculative and involves a high degree of risk. You should carefully consider the risk factors incorporated by reference from our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 814-00702) and any subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K we file after the date of this prospectus and before the termination of the offering of securities under this prospectus, and all other information contained or incorporated by reference into this prospectus and any free writing prospectus, as updated by our subsequent filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the risk factors and other information contained in any prospectus supplement and any free writing prospectus before acquiring any of such securities. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. Each of the risk factors could materially adversely affect our business, financial condition and results of operations. In such case, our NAV and the trading price of our securities could decline, and you may lose all or part of your investment.

 

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FORWARD-LOOKING STATEMENTS

 

The matters discussed in this prospectus, including the documents that we incorporate by reference herein, and any applicable prospectus supplement or free writing prospectus, including the documents we incorporate by reference therein, as well as in future oral and written statements by management of Hercules Capital, Inc., that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this prospectus and any applicable prospectus supplement or free writing prospectus include statements as to:

 

 

our current and future management structure;

 

 

our future operating results;

 

 

our business prospects and the prospects of our prospective portfolio companies;

 

 

the impact of investments that we expect to make;

 

 

our informal relationships with third parties including in the venture capital industry;

 

 

the expected market for venture capital investments and our addressable market;

 

 

the dependence of our future success on the general economy and its impact on the industries in which we invest;

 

 

our ability to access debt markets and equity markets;

 

 

the ability of our portfolio companies to achieve their objectives;

 

 

our expected financings and investments;

 

 

our regulatory structure and tax status;

 

 

our ability to operate as a BDC, a small business investment company, or SBIC, and a RIC;

 

 

the adequacy of our cash resources and working capital;

 

 

the timing of cash flows, if any, from the operations of our portfolio companies;

 

 

the timing, form and amount of any distributions;

 

 

the impact of fluctuations in interest rates on our business;

 

 

the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

 

 

our ability to recover unrealized losses.

 

You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this prospectus, any free writing prospectus, and the documents incorporated by reference into this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this prospectus.

 

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USE OF PROCEEDS

 

We intend to use the net proceeds from selling our securities to fund investments in debt and equity securities in accordance with our investment objectives, to make acquisitions, to retire certain debt obligations and for other general corporate purposes. The supplement to this prospectus or any free writing prospectus relating to an offering will more fully identify the use of proceeds from such offering.

 

We anticipate that substantially all of the net proceeds from any offering of our securities will be used as described above within twelve months, but in no event longer than two years. Pending such uses and investments, we will invest the net proceeds primarily in cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. Our ability to achieve our investment objective may be limited to the extent that the net proceeds of any offering, pending full investment, are held in lower yielding short-term instruments.

 

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

 

Our common stock is traded on the NYSE under the symbol “HTGC.”

 

The following table sets forth the range of high and low sales prices of our common stock, the sales price as a percentage of NAV and the distributions declared by us for each fiscal quarter. The stock quotations are interdealer quotations and do not include markups, markdowns or commissions.

 

           

Price Range

   

Premium/
Discount of
High Sales

   

Premium/
Discount of
Low Sales

   

Cash
Distribution

 
   

NAV(1)

   

High

   

Low

    Price to NAV     Price to NAV     per Share  

2017

                                               

First quarter

  $ 9.76     $ 15.43     $ 14.12       58.1 %     44.7 %   $ 0.310  

Second quarter

  $ 9.87     $ 15.56     $ 12.66       57.6 %     28.3 %   $ 0.310  

Third quarter

  $ 10.00     $ 13.50     $ 12.04       35.0 %     20.4 %   $ 0.310  

Fourth quarter

  $ 9.96     $ 13.94     $ 12.44       39.9 %     24.9 %   $ 0.310  

2018

                                               

First quarter

  $ 9.72     $ 13.25     $ 11.89       36.3 %     22.3 %   $ 0.310  

Second quarter

  $ 10.22     $ 12.97     $ 11.99       26.9 %     17.3 %   $ 0.310  

Third quarter

  $ 10.38     $ 13.64     $ 12.71       31.4 %     22.4 %   $ 0.330 (2) 

Fourth quarter

  $ 9.90     $ 13.28     $ 10.63       34.1 %     7.4 %   $ 0.310  

2019

                                               

First quarter

    *     $ 14.04     $ 11.23       *       *       **  

Second quarter (through April 23, 2019)

    *     $ 12.83     $ 12.57       *       *       **  

 


(1)

NAV per share is generally determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.

(2)

Includes a supplemental distribution of $0.02 per share.

*

NAV has not yet been calculated for this period.

**

Cash distribution per share has not yet been determined for this period.

 

The last reported price for our common stock on April 23, 2019 was $12.83 per share.

 

Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV will decrease. At times, our shares of common stock have traded at a premium to NAV and at times our shares of common stock have traded at a discount to the net assets attributable to those shares. It is not possible to predict whether the shares offered hereby will trade at, above, or below NAV.

 

11

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PORTFOLIO COMPANIES

(dollars in thousands)

 

The following tables set forth certain information as of December 31, 2018 regarding each portfolio company in which we had a debt or equity investment. Other than these investments, our only formal relationship with our portfolio companies is the offer to make available significant managerial assistance. In addition, we may receive rights to observe the Board of Directors’ meetings of our portfolio companies. Amounts are presented in thousands.

 

(dollars in thousands)

 

Portfolio Company

 

Sub-Industry

 

Type of
Investment
(1)

 

Maturity Date

 

Interest Rate and Floor(2)

 

Principal Amount

   

Cost(3)

   

Value(4)

 

Debt Investments

                                       

Biotechnology Tools

                                       

Under 1 Year Maturity

                                       

Exicure, Inc. (11)

8045 Lamon Avenue, Suite 410

Skokie, IL 60077

 

Biotechnology Tools

 

Senior Secured

 

September 2019

 

Interest rate PRIME + 6.45% or Floor rate of 9.95%, 3.85% Exit Fee

  $ 4,999     $ 5,165     $ 5,165  

Subtotal: Under 1 Year Maturity

            5,165       5,165  

Subtotal: Biotechnology Tools (0.54%)*

            5,165       5,165  

Consumer & Business Products

                                       

1-5 Years Maturity

                                       

WHOOP, INC. (12)

1325 Boylston Street, Suite 401

Boston, MA 02251

 

Consumer & Business Products

 

Senior Secured

 

July 2021

 

Interest rate PRIME + 3.75% or Floor rate of 8.50%, 6.95% Exit Fee

  $ 6,000       6,026       5,983  

Subtotal: 1-5 Years Maturity

            6,026       5,983  

Subtotal: Consumer & Business Products (0.63%)*

            6,026       5,983  

Diversified Financial Services

                                       

1-5 Years Maturity

                                       

Gibraltar Business Capital, LLC. (7)

400 Skokie Blvd #375

Northbrook, IL 60062

 

Diversified Financial Services

 

Unsecured

 

March 2023

 

Interest rate FIXED 14.50%

  $ 15,000       14,729       14,401  

Subtotal: 1-5 Years Maturity

            14,729       14,401  

Subtotal: Diversified Financial Services (1.51%)*

            14,729       14,401  

Drug Delivery

                                       

1-5 Years Maturity

                                       

AcelRx Pharmaceuticals, Inc. (11)

351 Galveston Drive

Redwood City, CA 94063

 

Drug Delivery

 

Senior Secured

 

March 2020

 

Interest rate PRIME + 6.05% or Floor rate of 9.55%, 11.69% Exit Fee

  $ 10,936       11,926       11,842  

Antares Pharma Inc. (10)(11)(15)

100 Princeton South, Suite 300

Ewing, NJ 08628

 

Drug Delivery

 

Senior Secured

 

July 2022

 

Interest rate PRIME + 4.50% or Floor rate of 9.25%, 4.25% Exit Fee

  $ 25,000       25,313       25,081  

Subtotal: 1-5 Years Maturity

            37,239       36,923  

Subtotal: Drug Delivery (3.86%)*

            37,239       36,923  

Drug Discovery & Development

                                       

Under 1 Year Maturity

                                       

Auris Medical Holding, AG (5)(10)

Dornacherstrasse 210

CH-4053, Basel Switzerland

 

Drug Discovery & Development

 

Senior Secured

 

February 2019

 

Interest rate PRIME + 6.05% or Floor rate of 9.55%, 5.75% Exit Fee

  $ 757     $ 1,471     $ 1,471  

Brickell Biotech, Inc. (12)

5777 Central Ave, Suite 102

Boulder, CO 80301

 

Drug Discovery & Development

 

Senior Secured

 

September 2019

 

Interest rate PRIME + 5.70% or Floor rate of 9.20%, 7.82% Exit Fee

  $ 4,808       5,281       5,281  

Epirus Biopharmaceuticals, Inc. (8)

99 High Street

Boston, MA 02110-2320

 

Drug Discovery & Development

 

Senior Secured

 

June 2019

 

Interest rate PRIME + 4.70% or Floor rate of 7.95%, 3.00% Exit Fee

  $ 2,203       2,487        

Subtotal: Under 1 Year Maturity

            9,239       6,752  

1-5 Years Maturity

                                       

Acacia Pharma Inc. (10)(11)

The Officers' Mess, Royston Rd, Duxford

Cambridge, UK CB22 4QH

 

Drug Discovery & Development

 

Senior Secured

 

January 2022

 

Interest rate PRIME + 4.50% or Floor rate of 9.25%, 3.95% Exit Fee

  $ 10,000       9,871       9,819  

Aveo Pharmaceuticals, Inc. (11)

One Broadway, 14th Floor

Cambridge, MA 02142

 

Drug Discovery & Development

 

Senior Secured

 

July 2021

 

Interest rate PRIME + 4.70% or Floor rate of 9.45%, 5.40% Exit Fee

  $ 10,000       10,111       10,042  

 

 

Drug Discovery & Development

 

Senior Secured

 

July 2021

 

Interest rate PRIME + 4.70% or Floor rate of 9.45%, 3.00% Exit Fee

  $ 10,000       10,220       10,157  

Total Aveo Pharmaceuticals, Inc.

  $ 20,000       20,331       20,199  

Axovant Sciences Ltd. (5)(10)(11)(16)

11 Times Square 33rd Floor

New York, NY 10036

 

Drug Discovery & Development

 

Senior Secured

 

March 2021

 

Interest rate PRIME + 6.80% or Floor rate of 10.55%

  $ 50,219       49,485       49,286  

BridgeBio Pharma LLC (13)(16)

421 Kipling Street

Palo Alto, CA 94301

 

Drug Discovery & Development

 

Senior Secured

 

July 2022

 

Interest rate PRIME + 4.35% or Floor rate of 9.35%, 6.35% Exit Fee

  $ 35,000       35,054       35,263  

 

 

Drug Discovery & Development

 

Senior Secured

 

July 2022

 

Interest rate PRIME + 3.35% or Floor rate of 9.10%, 5.75% Exit Fee

  $ 20,000       19,904       19,904  

Total BridgeBio Pharma LLC

  $ 55,000       54,958       55,167  

 

12

Table of Contents

 

Portfolio Company   Sub-Industry   Type of
Investment
(1)
  Maturity Date   Interest Rate and Floor(2)   Principal Amount     Cost(3)     Value(4)  

Chemocentryx, Inc. (10)(15)

850 Maude Avenue

Mountain View, CA 94043

 

Drug Discovery & Development

 

Senior Secured

 

December 2022

 

Interest rate PRIME + 3.30% or Floor rate of 8.05%, 6.25% Exit Fee

  $ 20,000       19,957       20,104  

Genocea Biosciences, Inc. (11)

100 Acorn Park Drive, 5th Floor

Cambridge, MA 02140

 

Drug Discovery & Development

 

Senior Secured

 

May 2021

 

Interest rate PRIME + 2.75% or Floor rate of 7.75%, 10.12% Exit Fee

  $ 14,000       14,937       14,788  

Merrimack Pharmaceuticals, Inc. (12)

One Kendall Square, Suite B7201

Cambridge, MA 2139

 

Drug Discovery & Development

 

Senior Secured

 

August 2021

 

Interest rate PRIME + 4.00% or Floor rate of 9.25%, 5.55% Exit Fee

  $ 15,000       15,024       15,024  

Mesoblast (5)(10)(11)

55 Collins Street Level 38

Melbourne, Victoria, Australia 3000

 

Drug Discovery & Development

 

Senior Secured

 

March 2022

 

Interest rate PRIME + 4.95% or Floor rate of 9.45%, 6.95% Exit Fee

  $ 35,000       35,346       35,190  

Metuchen Pharmaceuticals LLC (14)

11 Commerce Drive, First Floor

Cranford, NJ 07016

 

Drug Discovery & Development

 

Senior Secured

 

October 2020

 

Interest rate PRIME + 7.25% or Floor rate of 10.75%, PIK Interest 1.35%, 2.25% Exit Fee

  $ 18,569       19,256       19,122  

Motif BioSciences Inc. (5)(10)(11)(15)

125 Park Avenue., 25th Floor

New York, NY 10017

 

Drug Discovery & Development

 

Senior Secured

 

September 2021

 

Interest rate PRIME + 5.50% or Floor rate of 10.00%, 2.15% Exit Fee

  $ 15,000       14,907       14,786  

Myovant Sciences, Ltd. (5)(10)(11)

2000 Sierra Point Parkway, 9th Floor

Brisbane, CA 94005

 

Drug Discovery & Development

 

Senior Secured

 

November 2021

 

Interest rate PRIME + 4.00% or Floor rate of 8.25%, 6.55% Exit Fee

  $ 40,000       40,320       40,151  

Nabriva Therapeutics (5)(10)

25-28 North Wall Quay

IFSC, Dublin 1, Ireland 19406

 

Drug Discovery & Development

 

Senior Secured

 

June 2023

 

Interest rate PRIME + 4.30% or Floor rate of 9.80%, 6.95% Exit Fee

  $ 25,000       24,750       24,750  

Paratek Pharmaceuticals, Inc. (p.k.a. Transcept Pharmaceuticals, Inc.) (10)(11)(15)(16)

75 Park Plaza, 4th Floor

Boston, MA 02116

 

Drug Discovery & Development

 

Senior Secured

 

September 2020

 

Interest rate PRIME + 2.75% or Floor rate of 8.50%, 4.50% Exit Fee

  $ 40,000       40,882       40,472  

 

 

 

Drug Discovery & Development

 

Senior Secured

 

September 2021

 

Interest rate PRIME + 2.75% or Floor rate of 8.50%, 4.50% Exit Fee

  $ 10,000       10,240       10,137  

 

 

Drug Discovery & Development

 

Senior Secured

 

September 2021

 

Interest rate PRIME + 2.75% or Floor rate of 8.50%, 2.25% Exit Fee

  $ 10,000       10,084       9,925  
   

Drug Discovery & Development

 

Senior Secured

 

August 2022

 

Interest rate PRIME + 2.10% or Floor rate of 7.85%, 6.95% Exit Fee

  $ 10,000       10,014       10,014  

Total Paratek Pharmaceuticals, Inc. (p.k.a. Transcept Pharmaceuticals, Inc.)

  $ 70,000       71,220       70,548  

Stealth Bio Therapeutics Corp. (5)(10)(11)

275 Grove Street, Suite 3-107

Newton, MA 02466

 

Drug Discovery & Development

 

Senior Secured

 

January 2021

 

Interest rate PRIME + 5.50% or Floor rate of 9.50%, 6.25% Exit Fee

  $ 19,313       19,740       19,597  

Tricida, Inc. (11)(15)

7000 Shoreline Ct #201

South San Francisco, CA 94080

 

Drug Discovery & Development

 

Senior Secured

 

March 2022

 

Interest rate PRIME + 3.35% or Floor rate of 8.85%, 8.19% Exit Fee

  $ 40,000       39,622       39,794  

uniQure B.V. (5)(10)(11)

Paasheuvelweg 25A

Amsterdam, The Netherlands 1105 BP

 

Drug Discovery & Development

 

Senior Secured

 

June 2023

 

Interest rate PRIME + 3.35% or Floor rate of 8.85%, 7.72% Exit Fee

  $ 35,000       35,538       35,386  

Verastem, Inc. (11)

117 Kendrick Street, Suite 500

Needham, MA 02494

 

Drug Discovery & Development

 

Senior Secured

 

December 2020

 

Interest rate PRIME + 6.00%
or Floor rate of 10.50%, 4.50% Exit Fee

  $ 5,000       5,058       5,059  

 

 

Drug Discovery & Development

 

Senior Secured

 

December 2020

 

Interest rate PRIME + 6.00%
or Floor rate of 10.50%, 4.50% Exit Fee

  $ 5,000       5,082       5,083  

 

 

Drug Discovery & Development

 

Senior Secured

 

December 2020

 

Interest rate PRIME + 6.00% or Floor rate of 10.50%, 4.50% Exit Fee

  $ 5,000       5,057       5,057  
   

Drug Discovery & Development

 

Senior Secured

 

December 2020

 

Interest rate PRIME + 6.00% or Floor rate of 10.50%, 4.50% Exit Fee

  $ 10,000       10,033       9,976  

Total Verastem, Inc.

  $ 25,000       25,230       25,175  

X4 Pharmaceuticals Inc.

955 Massachusetts Ave 4th Floor

Cambridge, MA 02139

 

Drug Discovery & Development

 

Senior Secured

 

November 2021

 

Interest rate PRIME + 4.25% or Floor rate of 9.50%, 7.95% Exit Fee

  $ 10,000       9,746       9,746  

Subtotal: 1-5 Years Maturity

            520,238       518,632  

Subtotal: Drug Discovery & Development (54.99%)*

            529,477       525,384  

Electronics & Computer Hardware

                                       

1-5 Years Maturity

                                       

908 DEVICES INC. (15)

645 Summer St. 2nd floor

Boston, MA 02210

 

Electronics & Computer Hardware

 

Senior Secured

 

September 2020

 

Interest rate PRIME + 4.00% or Floor rate of 8.25%, 4.25% Exit Fee

  $ 10,000     $ 10,145     $ 10,155  

 

13

Table of Contents

 

Portfolio Company   Sub-Industry   Type of
Investment
(1)
  Maturity Date   Interest Rate and Floor(2)   Principal Amount     Cost(3)     Value(4)  

Glo AB (5)(10)(13)(14)

1225 Bordeaux Drive

Sunnyvale, CA 94089

 

Electronics & Computer Hardware

 

Senior Secured

 

February 2021

 

Interest rate PRIME + 6.20% or Floor rate of 10.45%, PIK Interest 1.75%, 2.95% Exit Fee

  $ 12,192       12,265       5,556  

Subtotal: 1-5 Years Maturity

            22,410       15,711  

Subtotal: Electronics & Computer Hardware (1.64%)*

            22,410       15,711  

Healthcare Services, Other

                                       

1-5 Years Maturity

                                       

Oak Street Health (12)

30 W. Monroe St. Suite 1200

Chicago, IL 60603

 

Healthcare Services, Other

 

Senior Secured

 

September 2021

 

Interest rate PRIME + 5.00% or Floor rate of 9.75%, 5.95% Exit Fee

  $ 30,000       30,486       30,338  

PH Group Holdings (13)(17)

950 N Glebe Rd., Suite 4000

Arlington, VA 22203

 

Healthcare Services, Other

 

Senior Secured

 

September 2020

 

Interest rate PRIME + 7.45% or Floor rate of 10.95%

  $ 20,000       19,889       19,806  

 

 

Healthcare Services, Other

 

Senior Secured

 

September 2020

 

Interest rate PRIME + 7.45% or Floor rate of 10.95%

  $ 10,000       9,938       9,896  

Total PH Group Holdings

  $ 30,000       29,827       29,702  

Subtotal: 1-5 Years Maturity

            60,313       60,040  

Subtotal: Healthcare Services, Other (6.28%)*

            60,313       60,040  

Information Services

                                       

1-5 Years Maturity

                                       

MDX Medical, Inc. (14)(15)(19)

160 Chubb Avenue, Suite 301

Lyndhurst, NJ 07071

 

Information Services

 

Senior Secured

 

December 2020

 

Interest rate PRIME + 4.00% or Floor rate of 8.25%, PIK Interest 1.70%

  $ 15,288       15,037       14,987  

Subtotal: 1-5 Years Maturity

            15,037       14,987  

Subtotal: Information Services (1.57%)*

            15,037       14,987  

Internet Consumer & Business Services

                                       

Under 1 Year Maturity

                                       

LogicSource

20 Marshall Street

South Norwalk, CT 06854

 

Internet Consumer & Business Services

 

Senior Secured

 

October 2019

 

Interest rate PRIME + 6.25% or Floor rate of 9.75%, 5.00% Exit Fee

  $ 3,099     $ 3,486     $ 3,486  

The Faction Group LLC (11)

1660 Lincoln St., Suite 1600

Denver, CO 80264

 

Internet Consumer & Business Services

 

Senior Secured

 

January 2019

 

Interest rate PRIME + 4.75% or Floor rate of 8.25%

  $ 2,000       2,000       2,000  

Subtotal: Under 1 Year Maturity

            5,486       5,486  

1-5 Years Maturity

                                       

AppDirect, Inc. (11)(19)

650 California Street, Fl 25

San Francisco, CA 94108

 

Internet Consumer & Business Services

 

Senior Secured

 

January 2022

 

Interest rate PRIME + 5.70% or Floor rate of 9.95%, 3.45% Exit Fee

  $ 20,000       20,006       19,941  

Art.com, Inc. (12)(14)(15)

2100 Powell Street 13th Floor

Emeryville, CA 94608

 

Internet Consumer & Business Services

 

Senior Secured

 

April 2021

 

Interest rate PRIME + 5.40% or Floor rate of 10.15%, PIK Interest 1.70%, 1.50% Exit Fee

  $ 10,117       10,020       10,028  

Cloudpay, Inc. (5)(10)

Kingsgate House, Newbury Road Andover

Hampshire, United Kingdom SP10 4DU

 

Internet Consumer & Business Services

 

Senior Secured

 

April 2022

 

Interest rate PRIME + 4.05% or Floor rate of 8.55%, 6.95% Exit Fee

  $ 11,000       11,017       11,020  

Contentful, Inc. (5)(10)(14)

150 Spear Street,

San Francisco, CA 94105

 

Internet Consumer & Business Services

 

Senior Secured

 

July 2022

 

Interest rate PRIME + 2.95% or Floor rate of 7.95%, PIK Interest 1.25%

  $ 3,750       3,692       3,692  

Convercent, Inc. (14)(15)(17)

5995 Greenwood Plaza Blvd Suite 110

Greenwood Village, CO 80111

 

Internet Consumer & Business Services

 

Senior Secured

 

July 2022

 

Interest rate PRIME + 2.55% or Floor rate of 7.80%, PIK Interest 2.95%, 1.00% Exit Fee

  $ 7,500       7,419       7,419  

EverFi, Inc. (11)(14)(16)

3299 K Street N.W., 4th Floor

Washington, DC 20007

 

Internet Consumer & Business Services

 

Senior Secured

 

May 2022

 

Interest rate PRIME + 3.90% or Floor rate of 8.65%, PIK Interest 2.30%

  $ 60,729       60,687       60,408  

Fastly, Inc. (17)(19)

475 Brannan St., Suite 300

San Francisco, CA 94107

 

Internet Consumer & Business Services

 

Senior Secured

 

December 2021

 

Interest rate PRIME + 4.25%, 1.50% Exit Fee

  $ 6,667       6,563       6,563  

First Insight, Inc. (15)

2000 Ericsson Drive, Suite 200

Warrendale, PA 15086

 

Internet Consumer & Business Services

 

Senior Secured

 

November 2021

 

Interest rate PRIME + 6.25% or Floor rate of 11.25%

  $ 7,500       7,368       7,375  

Greenphire, Inc. (17)

630 Allendale Road, Suite 250

King of Prussia, PA 19406

 

Internet Consumer & Business Services

 

Senior Secured

 

January 2021

 

Interest rate 3-month LIBOR + 8.00% or Floor rate of 9.00%

  $ 2,776       2,776       2,785  

 

 

Internet Consumer & Business Services

 

Senior Secured

 

January 2021

 

Interest rate PRIME + 3.75% or Floor rate of 7.00%

  $ 1,500       1,500       1,498  

Total Greenphire, Inc.

  $ 4,276       4,276       4,283  

Intent Media, Inc. (12)(17)

75 Varick St.,

New York, NY 10013

 

Internet Consumer & Business Services

 

S