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Hercules Technology: First Steps In Growing The Balance Sheet

|Includes:Hercules Capital, Inc. (HTGC)

Hercules Technology Growth Capital (NASDAQ:HTGC) has been suggesting on its Conference calls that a large number of new deals are in the negotiation and due diligence process, but have not yet hit the balance sheet. The guidance given was that the Company’s asset base might be flat or even shrink in the first quarter of 2010 but should increase from the second quarter.

An increase in assets, assuming bad debts have peaked, would mean higher earnings and a higher dividend from the $0.20 announced for the IQ 2010.

In recent days HTGC has announced two transactions which support this very deliberate guidance. First there was an add-on investment of $3mn in InfoLogix, an existing portfolio company. Today, HTGC announced a $25mn position  to Velocity Technology Solutions, a leading application service provider of cloud-based technologies for the enterprise software market. The Company served as the lead agent on the $45mn deal, along with TCW Special Situations, who put up the remaining $20mn.

It’s a start for HTGC, and supports the market’s confidence in the stock, as reflected by a stock price that has remained strong (despite an initial swoon of over 10%).

Disclosure: Long HTGC;
Stocks: HTGC