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Hercules Capital, Inc. (0J4M) Risk Analysis

Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning. Hercules Capital, Inc. disclosed 34 risk factors in its most recent earnings report. Hercules Capital, Inc. reported the most risks in the “Finance & Corporate” category.

Risk Overview Q3, 2024

Source: the company's latest filing for the period ended Sep 30, 2024, filed Oct 30, 2024

Risk Distribution
34Risks
Sector Avg.Finance & CorporateTech & InnovationLegal & RegulatoryProductionAbility to SellMacro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Risk Change Over Time

Hercules Capital, Inc. disclosed risks per quarterNo. of Risks34Q2Q3Showing: Q3, 2024
Risks removedRisks addedRisks changedHercules Capital, Inc. Risk Factors
No changes from previous report

Risk Highlights Q3, 2024

Main Risk Category
Finance & Corporate
With 20 Risks
Number of Disclosed Risks
34
No changes from last report
S&P 500 Average: 32
Recent Changes
1Risks added
0Risks removed
0Risks changed
Since Sep 2024
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 1

Risk Word Cloud

we may in the future seek to obtain approval from our stockholders to issue shares of our common stock at prices below the then current nav per share of our common stock, subject to certain limitations and with the approval from our independent directors. if we receive such approval, we may periodically issue shares of our common stock at a price below the then current nav per share of common stock. any such issuance could materially dilute your interest in our common stock and reduce our nav per share.future seek to obtain approvalan investment strategy focused on privately-held companies presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel, and a greater vulnerability to economic downturns.greater vulnerability to economic downturnswe may have difficulty paying our required distributions under applicable tax rules if we recognize income before or without receiving cash representing such income.difficulty paying our required distributionsif we are unable to satisfy code requirements for qualification as a ric, then we will be subject to corporate-level income tax, which would adversely affect our results of operations and financial condition.unable to satisfy code requirementsour loans could be subject to equitable subordination by a court which would increase our risk of loss with respect to such loans or we could be subject to lender liability claims.subject to lender liability claimsif we are unable to satisfy code requirements for qualification as a ric, then we will be subject to corporate-level income tax, which would adversely affect our results of operations and financial condition.subject to corporate-level income taxif we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. as a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.effective system of internal controlour relationship with certain portfolio companies may expose us to our portfolio companies' trade secrets and confidential information which may require us to be parties to non-disclosure agreements and restrict us from engaging in certain transactions.parties to non-disclosure agreementsas an internally managed bdc, we are dependent upon the availability of key management personnel for our future success, particularly scott bluestein, and if we are not able to hire and retain qualified personnel, or if we lose any member of our senior management team, our ability to implement our business strategy could be significantly harmed.availability of key management personnelour wholly owned sbic subsidiary may be unable to make distributions to us that will enable us to maintain ric status, which could result in the imposition of an entity-level tax.our wholly owned sbic subsidiary

Risk Factors Full Breakdown - Total Risks 34

Share Price & Shareholder Rights5 | 14.7%
  • Share Price & Shareholder Rights - Risk 1
    Additional Common Stock

    We are not generally able to issue and sell our common stock at a price below NAV per share. However, we may sell our common stock, warrants, options, or rights to acquire common stock at a price below the current NAV if our Board of Directors determines that such a sale is in the best interests of our stockholders and if our stockholders approve the sale. Our stockholders have authorized us to issue common stock below the then-current NAV subject to certain conditions for a specified period, which may result in dilution of existing stockholders’ ownership percentages.

  • Share Price & Shareholder Rights - Risk 2
    We may in the future choose to pay distributions in our own stock, in which case you may be required to pay tax in excess of the cash you receive

    We may opt to pay distributions in our own stock rather than in cash. Under applicable tax laws, stockholders receiving dividends in stock may be taxed on the full amount of the dividend even though they do not receive cash. This means that stockholders could incur a current tax liability without receiving cash to cover the tax cost, adversely affecting their overall returns.

  • Share Price & Shareholder Rights - Risk 3
    Stockholders may have current tax liability on dividends they elect to reinvest in our common stock but would not receive cash

    Stockholders participating in our dividend reinvestment plan will be deemed to have received dividends, potentially incurring tax liability on the full amount of the reinvested dividend—even though no cash is received. Consequently, unless a stockholder is tax-exempt, they may have to secure funds from other sources to cover their tax liability.

  • Share Price & Shareholder Rights - Risk 4
    Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock

    Our governing documents, including the Maryland General Corporation Law and our charter and bylaws, contain provisions that may discourage, delay, or complicate a change in control of our company or the removal of our directors. For example, the presence of a staggered board and provisions authorizing the issuance of ‘blank check’ preferred stock could deter takeover attempts and prevent premiums from being offered on our common stock.

  • Share Price & Shareholder Rights - Risk 5
    We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock

    If we issue preferred stock with dividend or conversion rights, liquidation preferences or other favorable economic terms, it could make an investment in our common stock less attractive. Dividends on any preferred stock must be cumulative and take precedence over dividends to common stockholders, potentially causing dilution of common stock value and adversely affecting the market price of our shares.

Accounting & Financial Operations2 | 5.9%
Debt & Financing13 | 38.2%

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky. The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment. They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result. It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process. Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”. Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report. According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing. You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector. Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements. A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below. 1. Financial & Corporate Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results. Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing. Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments. Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances. 2. Legal & Regulatory Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company. Regulation – risks related to compliance, GDPR, and new legislation. Environmental / Social – risks related to environmental regulation and to data privacy. Taxation & Government Incentives – risks related to taxation and changes in government incentives. 3. Production Costs – risks related to costs of production including commodity prices, future contracts, inventory. Supply Chain – risks related to the company’s suppliers. Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls. Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation. 4. Technology & Innovation Innovation / R&D – risks related to innovation and new product development. Technology – risks related to the company’s reliance on technology. Cyber Security – risks related to securing the company’s digital assets and from cyber attacks. Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying. 5. Ability to Sell Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers. Competition – risks related to the company’s competition including substitutes. Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration. Brand & Reputation – risks related to the company’s brand and reputation. 6. Macro & Political Economy & Political Environment – risks related to changes in economic and political conditions. Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19. International Operations – risks related to the global nature of the company. Capital Markets – risks related to exchange rates and trade, cryptocurrency.