Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on Nasdaq under the symbol “GLAD.” The following table reflects, by quarter, the high and low intraday sales prices per share of our common stock on the Nasdaq, the high and low intraday sales prices as a percentage of NAV per share and quarterly distributions declared per common share for each fiscal quarter during the last two completed fiscal years and the current fiscal year through November 11, 2022.
Quarter
Ended/
Ending Sales Prices Premium /
(Discount) of
High to
NAV (B)
Premium
(Discount) of
Low to
NAV (B)
Declared
Common
Stock
Distributions
NAV (A)
High Low
Fiscal Year ended September 30, 2021:
12/31/2020 $ 7.61 $ 9.22 $ 6.97 21.2 % ( 8.4 ) % $ 0.195
3/31/2021 8.11 10.39 8.60 28.1 6.0 0.195
6/30/2021 8.52 11.96 10.00 40.4 17.4 0.195
9/30/2021 9.28 12.05 11.01 29.8 18.6 0.195
Fiscal Year ended September 30, 2022:
12/31/2021 $ 9.44 $ 12.58 $ 10.26 33.3 % 8.7 % $ 0.195
3/31/2022 9.49 12.19 9.92 28.5 4.5 0.195
6/30/2022 9.12 12.78 9.43 40.1 3.4 0.203
9/30/2022 9.08 11.19 8.21 23.2 ( 9.6 ) 0.203
Fiscal Year ending September 30, 2023:
12/31/2022 (through 11/11/2022)
* $ 10.18 $ 8.23 *
*
$ 0.210
(A) NAV per share is 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 intraday sales prices. The NAVs per share shown are based on outstanding shares at the end of each period.
(B) The premiums (discounts) set forth in these columns represent the high or low, as applicable, intraday sale prices per share for the relevant quarter minus the NAV per share as of the end of such quarter, and therefore may not reflect the premium (discount) to NAV per share on the date of the high and low intraday sales prices.
* Not yet available, as the NAV per share as of the end of this quarter has not yet been determined.
As of November 11, 2022, there were 38 record owners of our common stock.
Distributions
We generally intend to distribute in the form of cash distributions a minimum of 90.0% of our Investment Company Taxable Income, if any, on a quarterly basis to our stockholders in the form of monthly distributions. We generally intend to retain some or all of our long-term capital gains, if any, but generally intend to designate the retained amount as a deemed distribution, after giving effect to any prior year realized losses that are carried forward, to supplement our equity capital and support the growth of our portfolio. However, in certain cases, our Board of Directors may choose to distribute our net realized long-term capital gains, if any, by paying a one-time special distribution. Additionally, our Credit Facility contains a covenant that limits distributions to our stockholders on an annual basis to the sum of our net investment income, net capital gains and amounts deemed to have been paid during the prior year in accordance with Section 855(a) of the Code.
Recent Sales of Unregistered Securities
We did not sell any unregistered shares of stock during the fiscal year ended September 30, 2022. See “ Capital Raising ” below for information regarding the unregistered sale of the 2027 Notes in November 2021.
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Purchases of Equity Securities
We did not repurchase any shares of our stock during the fourth quarter ended September 30, 2022.
Stock Performance Graph
The following graph shows the total stockholder return on an investment of $100 in cash on September 29, 2017 for (i) our common stock, (ii) the Nasdaq’s 100 total return index (“Nasdaq 100 TR”), (iii) the Standard & Poor’s 500 total return index (the “S&P 500 TR”) and (iv) the Standard and Poor’s BDC index (“S&P BDC”). The graph and other information furnished under the heading “Stock Performance Graph” shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference and shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act.
The returns on each investment assume reinvestment of dividends. This stock performance graph and the related textual information are not necessarily indicative of future performance.
GLAD Nasdaq
100 TR
S&P
500 TR
S&P BDC Index
9/29/2017 $ 100.00 $ 100.00 $ 100.00 $ 100.00
9/28/2018 110.34 128.91 117.91 104.06
9/30/2019 124.31 132.44 122.93 112.05
9/30/2020 104.61 197.00 141.55 89.94
9/30/2021 172.54 255.27 184.02 138.81
9/30/2022 139.48 192.16 155.55 118.23
Fees and Expenses
The following table is intended to assist you in understanding the costs and expenses that an investor in the Company will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this Annual Report contains a reference to fees or expenses paid by “us” or the “Company,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses. The following annualized percentages were calculated based on actual expenses incurred in the quarter ended September 30, 2022 and average net assets for the quarter ended September 30, 2022.
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Stockholder Transaction Expenses:
Sales load (as a percentage of offering price) (1)
— %
Offering expenses (as a percentage of offering price) (1)
— %
Dividend reinvestment plan expenses (2)
Up to a $25.00 Transaction Fee
Total stockholder transaction expenses (1)
— %
Annual expenses (as a percentage of net assets attributable to common stock) (3) :
Base Management fee (4)
3.48 %
Loan servicing fee (5)
2.20 %
Incentive fee (20% of realized capital gains and 20% of pre-incentive fee net investment income) (6)
2.37 %
Interest payments on borrowed funds (7)
5.22 %
Other expenses (8)
1.18 %
Total annual expenses (9)
14.45 %
__________
(1) The amounts set forth in this table do not reflect the impact of any sales load, sales commission or other offering expenses borne by the Company and its stockholders. If applicable, the prospectus or prospectus supplement relating to an offering of our common stock will disclose the offering price and the estimated offering expenses and total stockholder transaction expenses borne by the Company and its common stockholders as a percentage of the offering price. In the event that shares of our common stock are sold to or through underwriters, the applicable prospectus or prospectus supplement will also disclose the applicable sales load.
(2) The expenses of the dividend reinvestment plan, if any, are included in stock record expenses, a component of “other expenses.” If a participant elects by written notice to the plan agent prior to termination of his or her account to have the plan agent sell part or all of the shares held by the plan agent in the participant’s account and remit the proceeds to the participant, the plan agent is authorized to deduct a transaction fee, plus per share brokerage commissions, from the proceeds. The participants in the dividend reinvestment plan will bear a pro rata share of brokerage commissions incurred with respect to open market purchases, if any. See “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Distributions and Dividends to Stockholders—Dividend Reinvestment Plan” for information on the dividend reinvestment plan.
(3) The percentages presented in this table are gross of credits to any fees.
(4) In accordance with our Advisory Agreement, our annual base management fee is 1.75% (0.4375% quarterly) of our average gross assets, which are defined as total assets of the Company, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, and adjusted appropriately for any share issuances or repurchases. In accordance with the requirements of the SEC, the table above shows the Company’s management fee as a percentage of average net assets attributable to common shareholders. For purposes of the table, the gross base management fee has been converted to 3.48% of the average net assets as of September 30, 2022 by dividing the total dollar amount of the management fee by our average net assets. The base management fee for the quarter ended September 30, 2022 before application of any credits was $2.7 million. From time to time, the Adviser has non-contractually, unconditionally and irrevocably agreed to reduce the 1.75% base management fee on syndicated loan participations to 0.5%, to the extent that proceeds resulting from borrowings were used to purchase such syndicated loan participations. For the quarter ended September 30, 2022, this credit to the base management fee was $34 thousand.
Under the Advisory Agreement, the Adviser has provided and continues to provide managerial assistance to our portfolio companies. It may also provide services other than managerial assistance to our portfolio companies and receive fees therefor. Such services may include: (i) assistance obtaining, sourcing or structuring credit facilities, long term loans or additional equity from unaffiliated third parties; (ii) negotiating important contractual financial relationships; (iii) consulting services regarding restructuring of the portfolio company and financial modeling as it relates to raising additional debt and equity capital from unaffiliated third parties; and (iv) primary role in interviewing, vetting and negotiating employment contracts with candidates in connection with adding and retaining key portfolio company management team members. Generally, at the end of each quarter, 100.0% of the fees for such services are non-contractually, unconditionally and irrevocably credited against the base management fee that we would otherwise be required to pay to the Adviser; however, a small percentage of certain of such fees, primarily for valuation of the portfolio company, is retained by the Adviser in the form of reimbursement at cost for certain tasks completed by personnel of the Adviser. For the quarter ended September 30, 2022, the base management fee credit was $1.2 million. See “ Item 1. Business — Transactions with Related Parties — Investment Advisory and Management Agreement ” for additional information.
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(5) The Adviser services, administers and collects on the loans held by Business Loan in return for which the Adviser receives a 1.5% annual loan servicing fee payable monthly by Business Loan based on the monthly aggregate balance of loans held by Business Loan in accordance with the Credit Facility. For the three months ended September 30, 2022, the total loan servicing fee was $1.7 million. The entire loan servicing fee paid to the Adviser by Business Loan is generally non-contractually, unconditionally and irrevocably credited against the base management fee otherwise payable to the Adviser since Business Loan is a consolidated subsidiary of the Company, and overall, the base management fee (including any loan servicing fee) cannot exceed 1.75% of total assets (including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings) during any given fiscal year pursuant to the Advisory Agreement. See “Item 1. Business—Transactions with Related Parties—Loan Servicing Fee Pursuant to Credit Facility” and footnote 4 above for additional information.
(6) In accordance with our Advisory Agreement, the incentive fee consists of two parts: an income-based fee and a capital gains-based fee. The income-based fee is payable quarterly in arrears, and equals 20.0% of the excess, if any, of our pre-incentive fee net investment income that exceeds a 1.75% quarterly (7.0% annualized) hurdle rate of our net assets (2.0% quarterly and 8.0% annualized during the period from April 1, 2020 through March 31, 2023), subject to a “catch-up” provision measured as of the end of each calendar quarter. The “catch-up” provision requires us to pay 100.0% of our pre-incentive fee net investment income with respect to that portion of such income, if any, that exceeds the hurdle rate but is less than 125.0% of the quarterly hurdle rate (or 2.1875%, 2.4375% during the period from April 1, 2020 through March 31, 2022, and 2.5% during the period from April 1, 2022 through March 31, 2023) in any calendar quarter (8.75% annualized, 9.75% annualized during the period from April 1, 2020 through March 31, 2022, 10.0% annualized during the period from April 1, 2022 through March 31, 2023). The catch-up provision is meant to provide the Adviser with 20.0% of our pre-incentive fee net investment income as if a hurdle rate did not apply when our pre-incentive fee net investment income exceeds 125.0% of the quarterly hurdle rate in any calendar quarter (8.75% annualized, 9.75% annualized during the period from April 1, 2020 through March 31, 2022, and 10.0% annualized during the period from April 1, 2022 through March 31, 2023). The income-based incentive fee is computed and paid on income that may include interest that is accrued but not yet received in cash. Our pre-incentive fee net investment income used to calculate this part of the income-based incentive fee is also included in the amount of our gross assets used to calculate the 1.75% base management fee (see footnote 4 above). The capital gains-based incentive fee equals 20.0% of our net realized capital gains since our inception, if any, computed net of all realized capital losses and unrealized capital depreciation since our inception, less any prior payments, and is payable at the end of each fiscal year. We have not recorded any capital gains-based incentive fee from our inception through September 30, 2022. The income-based incentive fee for the quarter ended September 30, 2022 was $1.9 million.
From time to time, the Adviser has non-contractually, unconditionally and irrevocably agreed to waive a portion of the incentive fees, to the extent net investment income did not cover 100.0% of the distributions to common stockholders during the period. There was no incentive fee credit for the quarter ended September 30, 2022. There can be no guarantee that the Adviser will continue to credit any portion of the fees under the Advisory Agreement in the future.
Examples of how the incentive fee would be calculated (during the period from April 1, 2022 through March 31, 2023) are as follows:
• Assuming pre-incentive fee net investment income of 0.55%, there would be no income-based incentive fee because such income would not exceed the hurdle rate of 2.00%.
• Assuming pre-incentive fee net investment income of 2.10%, the income-based incentive fee would be as follows:
= 100% x (2.10% - 2.00%)
= 0.10%
• Assuming pre-incentive fee net investment income of 2.60%, the income-based incentive fee would be as follows:
= (100% x (“catch - up”: 2.50% - 2.00%)) + (20% x (2.60% - 2.50%))
= (100% x 0.50%) + (20% x 0.10%)
= 0.50%+ 0.02%
= 0.52%
• Assuming net realized capital gains of 6% and realized capital losses and unrealized capital depreciation of 1%, the capital gains-based incentive fee would be as follows:
= 20% x (6% - 1%)
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= 20% x 5%
= 1%
For a more detailed discussion of the calculation of the two-part incentive fee, see “Item 1. Business — Transactions with Related Parties — Investment Advisory and Management Agreement.”
(7) Includes amortization of deferred financing costs. As of September 30, 2022, we had $141.8 million in borrowings outstanding under our Credit Facility and $197.6 million in notes payable, net. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources— Revolving Line of Credit” for additional information regarding the Credit Facility and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources—Notes Payable” for additional information regarding our notes payable.
(8) Includes our overhead expenses, including payments under the Administration Agreement based on our projected allocable portion of overhead and other expenses estimated to be incurred by the Administrator in performing its obligations under the Administration Agreement for the current fiscal year. See “Item 1. Business—Transactions with Related Parties—Administration Agreement ” for additional information.
(9) Total annualized gross expenses, based on actual amounts incurred for the quarter ended September 30, 2022 (except as set forth in footnote 9), would be $45.6 million. After all non-contractual, unconditional and irrevocable credits described in footnote 4, footnote 5, and footnote 6 above are applied to the base management fee, the loan servicing fee, and the incentive fee, total annualized expenses, based on actual amounts incurred for the quarter ended September 30, 2022, would be $33.8 million or 10.73% as a percentage of net assets.
Examples
The following examples demonstrate 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. In calculating the following expense amounts, we have assumed we would have no additional leverage and that our quarterly operating expenses would remain at the levels set forth in the table above and are gross of credits to any fees. The amounts set forth below do not reflect the impact of sales load or offering expenses to be borne by the Company or its stockholders. In the prospectus supplement relating to an offering of securities pursuant to the applicable prospectus, the examples below will be restated to reflect the impact of the estimated offering expenses borne by the Company and its stockholders and, if applicable, the impact of the applicable sales load. The examples below and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, incentive fees, if any, and other expenses) may be greater or less than those shown. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%.
1 Year 3 Years 5 Years 10 Years
You would pay the following expenses on a $1,000 investment:
assuming a 5% annual return consisting entirely of ordinary income (1)(2)
$ 127 $ 352 $ 544 $ 909
assuming a 5% annual return consisting entirely of capital gains (2)(3)
$ 136 $ 373 $ 572 $ 937
(1) While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. Additionally, we have assumed that the entire amount of such 5% annual return would constitute ordinary income as we have not historically realized positive capital gains (computed net of all realized capital losses) on our investments. Because the assumed 5% annual return is significantly below the hurdle rate of 7% (annualized, 8% annualized during the period from April 1, 2020 through March 31, 2023) that we must achieve under the Advisory Agreement to trigger the payment of an income-based incentive fee, we have assumed, for purposes of this example, that no income-based incentive fee would be payable if we realized a 5% annual return on our investments.
(2) While the example assumes reinvestment of all dividends and distributions at NAV, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the average cost of shares of our common stock purchased in the open market in the period beginning on or before the payment date of the distribution and ending when the plan agent has expended for such purchases all of the cash that would have been otherwise payable to participants. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
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Resources—Distributions and Dividends to Stockholders—Dividend Reinvestment Plan ” for additional information regarding our dividend reinvestment plan.
(3) For purposes of this example, we have assumed that the entire amount of such 5% annual return would constitute capital gains and that no accumulated capital losses or unrealized depreciation exist that would have to be overcome first before a capital gains based incentive fee is payable.
Senior Securities
Information about our senior securities is shown in the following table for the audited periods as of our last ten fiscal years. The information has been derived from our audited financial statements for each respective period, which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The report of our independent registered public accounting firm, PricewaterhouseCoopers LLP, on the senior securities table as of September 30, 2022, is included elsewhere in this Annual Report.
Class and Year Total Amount
Outstanding (1)
Asset
Coverage
per Unit (2)
Involuntary
Liquidating
Preference per
Unit (3)
Average
Market Value
per Unit (4)
Revolving Credit Facilities
September 30, 2022 $ 141,800,000 $ 1,904 $ — N/A
September 30, 2021 50,500,000 2,307 $ — N/A
September 30, 2020 128,000,000 2,026 — N/A
September 30, 2019 66,900,000 3,369 — N/A
September 30, 2018 110,000,000 3,590 — N/A
September 30, 2017 93,000,000 3,882 — N/A
September 30, 2016 71,300,000 4,623 — N/A
September 30, 2015 127,300,000 2,946 — N/A
September 30, 2014 36,700,000 3,054 — N/A
September 30, 2013 46,900,000 3,410 — N/A
Series 2016 Term Preferred Stock (5)
September 30, 2013 $ 38,497,050 $ 3,410 $ 25.00 $ 25.49
Series 2021 Term Preferred Stock (6)
September 30, 2016 $ 61,000,000 $ 2,495 $ 25.00 $ 25.55
September 30, 2015 61,000,000 1,993 25.00 25.02
September 30, 2014 61,000,000 3,054 25.00 24.45
Series 2024 Term Preferred Stock (7)
September 30, 2019 $ 51,750,000 $ 2,385 $ 25.00 $ 24.99
September 30, 2018 51,750,000 2,444 25.00 25.63
September 30, 2017 51,750,000 2,496 25.00 25.09
6.125% Notes due 2023 (8)
September 30, 2020 57,500,000 2,026 — 25.28
September 30, 2019 57,500,000 3,369 — 26.18
5.375% Notes due 2024 (9)
September 30, 2021 $ 38,812,500 $ 2,307 $ — $ 25.33
September 30, 2020 38,812,500 2,026 — 24.49
5.125% Notes due 2026
September 30, 2022 $ 150,000,000 $ 1,904 $ — N/A
September 30, 2021 150,000,000 2,307 $ — N/A
3.75% Notes due 2027
September 30, 2022 $ 50,000,000 $ 1,904 $ — N/A
(1) Total amount of each class of senior securities outstanding at the end of the period presented.
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(2) Asset coverage ratio for a class of our “senior securities representing indebtedness” means the ratio of the value of our total assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of “senior securities representing indebtedness” and asset coverage ratio for a class of our “senior securities that are stock” means the ratio of the value of our total assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of “senior securities representing indebtedness” plus the aggregate involuntary liquidation preference of a class of “senior security that is stock.” Asset coverage per unit is the asset coverage ratio expressed in terms of dollar amounts per one thousand dollars of indebtedness.
(3) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it.
(4) Only applicable to our Term Preferred Stock, 6.125% notes due 2023 (the “2023 Notes”) and 5.375% notes due 2024 (“the 2024 Notes”) because the other senior securities are not registered for public trading. Average market value per unit is the average of the closing prices of the securities on the Nasdaq during the last 10 trading days of the period. Average market value per unit for our Series 2024 Term Preferred Stock for September 30, 2017 is the average of the closing prices of the shares on the Nasdaq during the last seven trading days of the period as the stock began trading on September 21, 2017.
(5) In November 2011, we issued 1,539,882 shares of 7.125% Series 2016 Term Preferred Stock (the “Series 2016 Term Preferred Stock”) through a public offering and subsequent exercise of an overallotment option. In May 2014, we voluntarily redeemed all outstanding shares of our Series 2016 Term Preferred Stock and therefore had no Series 2016 Term Preferred Stock outstanding at September 30, 2015.
(6) In May 2014, we issued 2,440,000 shares of 6.75% Series 2021 Term Preferred Stock (the “Series 2021 Term Preferred Stock”) through a public offering and subsequent exercise of an overallotment option. In September 2017, we voluntarily redeemed all outstanding shares of our Series 2021 Term Preferred Stock and therefore had no Series 2021 Term Preferred Stock outstanding at September 30, 2017.
(7) In September 2017, we issued 2,070,000 shares of Series 2024 Term Preferred Stock through a public offering and subsequent exercise of an overallotment option. In October 2019, we voluntarily redeemed all outstanding shares of our Series 2024 Term Preferred Stock.
(8) In November 2018, we completed a public debt offering of $57.5 million aggregate principal amount of the 2023 Notes, inclusive of the overallotment option. In January 2021, we voluntarily redeemed all of the 2023 Notes.
(9) In October 2019, we completed a public debt offering of $38.8 million aggregate principal amount of the 2024 Notes, inclusive of the overallotment option. In November 2021, we voluntarily redeemed all of the 2024 Notes.
ITEM 6. RESERVED