High risk or high opportunity? That the market now views Prospect Capital (PSEC +0.6%) as high-risk can be inferred from the dividend yield, says KBW's Greg Kelly - a whopping 13.3% compared to, for instance, the more-conservatively run Golub Capital (GBDC +0.6%) which yields just 7.5%.
While most BDCs are lenders, Prospect buys companies outright - the only of the 30 BDCs covered by Kelly which does this (though SLRC has done so with one).
As has been noted before by other analysts and Prospect management itself, if the SEC prevails in the accounting dispute, it will actually boost money going to shareholders while cutting management compensation. Another positive: Equity raises are off the table until the issue is resolved.
Prospect management paints the selling in the stock as "sell first, ask questions later," but The Street's Dan Freed muses that maybe owners are thinking twice about investing in a management which plays accounting games to line its pockets at the expense of earnings.
In other news, Evercore upgrades Prospect from Underweight to Equal Weight.