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  • Prospect Capital: With The SEC Issue Resolved, The Stock Has 50% Potential Return [View article]
    Not possible. There is no intangible franchise value to this business. It is merely a middleman, raising capital from lenders (low interest rate %) and public equity investors (13% dividend rate), and renting out that money at (hopefully) a higher rate (after accounting for defaults and a healthy fee to management).

    There is no goodwill here. Like a bank, it should trade near tangible book value (or net asset value).

    The risk, which is very real, is that management is choosing to invest fresh money into an existing portfolio company, and simultaneously taking back the same amount of money as a dividend --- and then calling it "earnings." Don't focus on the income statement and earnings -- look at PSEC's cash flow statement. . . . . . .
    Jul 7 09:44 PM | 8 Likes Like |Link to Comment
  • Prospect speaks to accounting concern; lenders step up [View news story]
    Management has manufactured earnings, in my opinion. It is a fact they have invested capital into portfolio companies while simultaneously taking a dividend. It is a paper shuffle. Compare the company's earnings to a scenario whereby they would NOT have executed the paper shuffle: less earnings. These are non-economic transactions with no bona fide counter party.

    I try to look through the accounting treatment (consolidate control portfolio companies vs. non-consolidation). The accounting treatment doesn't matter. I do not trust a management team that uses maneuvers like this to boost the bottom line. It can only continue so long. I sold my couple thousand shares. Not worth the risk of seeing the stock tank, since there is no upside. This stock used to trade at over $15 a share; those days are long gone, as per share book value consistently diminishes.
    May 13 11:13 PM | Likes Like |Link to Comment