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
Common stock
Our common stock is traded on Nasdaq, under the symbol “HRZN.” The last reported price for our common stock on March 1, 2021 was $14.85 per share, which represented a 35% premium to NAV per share. As of March 1, 2021 we had 18 stockholders of record, which did not include stockholders for whom shares are held in nominee or “street” name.
Shares of BDCs may trade at a market price that is less than the NAV that is attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at a premium that is unsustainable over the long term is separate and distinct from the risk that our NAV will decrease. It is not possible to predict whether our shares will trade at, above or below NAV in the future.
Sales of unregistered securities
We did not engage in any sales of unregistered equity securities during the years ended December 31, 2020, 2019 and 2018.
Issuer Purchases of Equity Securities
On April 24, 2020, our Board extended a previously authorized stock repurchase plan which allows us to repurchase up to $5.0 million of our outstanding common stock. Unless extended by our Board, the repurchase program will expire on the earlier of June 30, 2021 and the repurchase of $5.0 million of common stock. During the quarter ended December 31, 2020, we did not repurchase any shares of our common stock. During the years ended December 31, 2020, 2019 and 2018, we did not repurchase any shares of our common stock. From the inception of the stock repurchase program through December 31, 2020, we repurchased 167,465 shares of our common stock at an average price of $11.22 on the open market at a total cost of $1.9 million.
Any shares repurchased by us may have the effect of maintaining the market price of our common stock or retarding a decline in the market price of the common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. In addition, as any shares repurchased pursuant to the stock repurchase plan will be purchased at a price below the NAV per share as reported in our most recent financial statements, share repurchases may have the effect of increasing our NAV per share.
Distributions
We intend to continue making monthly distributions to our stockholders. The timing and amount of our monthly distributions, if any, is determined by our Board. Any distributions to our stockholders are declared out of assets legally available for distribution. We monitor available net investment income to determine if a tax return of capital may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, a portion of those distributions may be considered a return of capital to our common stockholders for U.S. federal income tax purposes. Thus, the source of distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gains.
In order to qualify to be subject to tax as a RIC, we must meet certain source-of-income, asset diversification and annual distribution requirements. Generally, in order to qualify as a RIC, we must derive at least 90% of our gross income during each tax year from dividends, interest, payments with respect to certain securities, loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to our business of investing in stock or other securities. We must also meet certain asset diversification requirements at the end of each quarter of each tax year. Failure to meet these diversification requirements on the last day of a quarter may result in us having to dispose of certain investments quickly in order to prevent the loss of RIC status. Any such dispositions could be made at disadvantageous prices or times, and may cause us to incur substantial losses.
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In addition, in order to be eligible for the special tax treatment accorded to RICs and to avoid the imposition of corporate level tax on the income and gains we distribute to our stockholders, each tax year we are required under the Code to distribute as dividends of an amount generally at least 90% of our investment company taxable income, determined without regard to any deduction for dividends paid to our stockholders. We refer to such amount as the Annual Distribution Requirement in this annual report on Form 10-K. Additionally, we must distribute, in respect of each calendar year, dividends of an amount generally at least equal to the sum of 98% of our calendar year net ordinary income (taking into account certain deferrals and elections); 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one year period ending on October 31 of such calendar year; and any net ordinary income or capital gain net income for preceding years that was not distributed during such years and on which we previously did not incur any U.S. federal income tax in order to avoid the imposition of a 4% U.S. federal excise tax. If we fail to qualify as a RIC for any reason and become subject to corporate income tax, the resulting corporate income taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. In addition, we could be required to recognize unrealized gains, incur substantial taxes and interest and make substantial distributions in order to re-qualify as a RIC. We cannot assure stockholders that they will receive any distributions.
Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such undistributed income. Distributions of any such carryover taxable income must be made through a distribution declared as of the earlier of the filing date of the corporate income tax return related to the tax year in which such taxable income was generated or the 15 th day of the ninth month following the end of such tax year, in order to count towards the satisfaction of the Annual Distribution Requirement for the tax year in which such taxable income was generated. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we may be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings. See “Item 1. Business — Regulation — Taxation as a RIC.”
We have adopted an “opt out” DRIP for our common stockholders. As a result, if we make a distribution, then stockholders’ cash distributions are automatically reinvested in additional shares of our common stock, unless they specifically opt out of the DRIP. If a stockholder opts out, that stockholder receives cash distributions. Although distributions paid in the form of additional shares of common stock are generally subject to U.S. federal, state and local taxes, stockholders participating in our DRIP do not receive any corresponding cash distributions with which to pay any such applicable taxes. We may use newly issued shares to implement the DRIP, or we may purchase shares in the open market in connection with our obligations under the DRIP.
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Stock performance graph
The following graph compares the return on our common stock with that of the Standard & Poor’s 500 Stock Index and the Wells Fargo BDC Index, for the period from December 31, 2015 through December 31, 2020. The graph assumes that, on December 31, 2015, a person invested $100 in each of our common stock, the S&P 500 Index and the Wells Fargo BDC Index. The graph measures total stockholder return, which takes into account both changes in stock price and distributions. It assumes that distributions paid are invested in like securities. The graph and other information furnished under this Part II Item 5 of our annual report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act. The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Item 6. Selected Financial Data
The following selected consolidated financial data of the Company as of December 31, 2020, 2019, 2018, 2017 and 2016, and for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 are derived from the consolidated financial statements that have been audited by RSM US LLP, an independent registered public accounting firm. These selected financial data should be read in conjunction with our financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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As of and for the years ended December 31,
(Dollars in thousands, except per share data and portfolio company counts)
2020
2019
2018
2017
2016
Statement of Operations Data:
Total investment income
$
46,035
$
43,125
$
31,090
$
25,777
$
32,984
Base management fee
6,458
5,556
4,578
3,786
4,727
Performance based incentive fee
5,187
6,966
4,393
1,714
2,126
All other expenses
13,419
11,742
9,403
8,034
9,119
Base management and performance based incentive fees waived
—
(1,848)
(1,184)
(79)
—
Net investment income before excise tax
20,971
20,709
13,900
12,322
17,012
Provision (credit) for excise tax
222
239
34
25
(87)
Net investment income
20,749
20,470
13,866
12,297
17,099
Net realized (loss) gain on investments
(14,698)
(4,173)
645
(21,191)
(7,776)
Net unrealized appreciation (depreciation) on investments
313
3,201
(1,501)
18,485
(14,236)
Net increase (decrease) in net assets resulting from operations
$
6,364
$
19,498
$
13,010
$
9,591
$
(4,913)
Dollar amount of distributions declared
$
22,674
$
16,987
$
13,837
$
13,823
$
15,403
Per Share Data:
Net asset value
$
11.02
$
11.83
$
11.64
$
11.72
$
12.09
Net investment income
1.18
1.52
1.20
1.07
1.48
Net realized (loss) gain on investments
(0.84)
(0.31)
0.06
(1.84)
(0.67)
Net change in unrealized appreciation (depreciation) on investments
0.02
0.24
(0.13)
1.60
(1.24)
Net increase (decrease) in net assets resulting from operations
0.36
1.45
1.13
0.83
(0.43)
Per share distributions declared
1.25
1.20
1.20
1.20
1.335
Statement of Assets and Liabilities Data:
Investments, at fair value
$
352,545
$
319,551
$
248,441
$
222,099
$
194,003
Other assets
54,612
24,450
18,308
12,047
45,249
Total assets
407,157
344,001
266,749
234,146
239,252
Borrowings
185,819
152,050
126,853
94,075
95,597
Total liabilities
194,560
159,946
132,492
99,071
100,060
Total net assets
$
212,597
$
184,055
$
134,257
$
135,075
$
139,192
Other data:
Weighted yield on debt investments at fair value
14.6
%
16.7
%
15.3
%
15.1
%
14.9
%
Weighted yield on all investments at fair value
13.9
%
15.7
%
13.9
%
14.0
%
14.4
%
Number of portfolio companies at period end:
Debt investments
34
35
34
33
44
Warrants investments
60
66
67
72
78
Equity investments
8
9
9
6
5
Other investments
2
1
4
4
2
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.