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Item 5. Market for Registrant’s Common Equity

2022-03-03 compared with 2021-03-12 · 76 added, 56 removed, 51 unchanged (72% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

We currently offer and sell shares of our common stock in transactions exempt from registration under the Securities Act under Section 4(a)(2) and Regulation D, as well as under Regulation S under the Securities Act.

There will be no established public trading market for our common stock, nor can we give any assurance that a public trading market will develop until we conduct an IPO and list our shares of common stock on a national securities exchange.

Because shares of our common stock are being acquired by investors in one or more transactions “not involving a public offering,” they are “restricted securities” and may be required to be held indefinitely.

Our common shares may not be sold, transferred, assigned, pledged or otherwise disposed of unless (i) our consent is granted, and (ii) the common shares are registered under applicable securities laws or specifically exempted from registration (in which case the stockholder may, at our option, be required to provide us with a legal opinion, in form and substance satisfactory to us, that registration is not required).

Accordingly, an investor must be willing to bear the economic risk of investment in our common shares until we are liquidated.

No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of the common shares may be made except by registration of the transfer on our books.

Each transferee will be required to execute an instrument agreeing to be bound by these restrictions and the other restrictions imposed on our common shares and to execute such other instruments or certifications as are reasonably required by us.

Our common stock began trading on the Nasdaq Global Select Market on October 21, 2021 under the symbol “RWAY” in connection with our IPO of shares of our common stock.

Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares.

The possibility that our shares of common stock will trade at a discount from NAV per share or at premiums that are unsustainable over the long-term are separate and distinct from the risk that our NAV per share will decrease.

It is not possible to predict whether our common stock will trade at, above, or below NAV per share.

See “Item 1A.

Risk Factors—Risks Related to an Investment in Our Common Stock.”

As of March 2, 2022, there were 189 holders of record of our common stock.

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Any distribution to our stockholders will be declared out of assets legally available for distribution.

We anticipate that distributions will be paid from income primarily generated by interest and dividend income earned on investments made subsequent to the Initial Closing.

We anticipate that distributions will be paid from income primarily generated by interest and dividend income earned on investments made by us.

We will not be able to determine whether any specific distribution will be treated as made out of our taxable earnings or as a return of capital until after the end of our taxable year.

The amount treated as a tax-free return of capital will reduce a stockholder’s adjusted basis in his or her common stock, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale or other disposition of his or her common stock.

For the year ended December 31, 2020, the Company declared and paid dividends in the amount of $39,709,233 of which $7,265,785 was distributed in cash and the remainder distributed in shares to stockholders pursuant to the Company’s dividend reinvestment program.

For the year ended December 31, 2019, the Company declared and paid dividends in the amount of $40,651,334 of which $8,192,547 was distributed in cash and the remainder distributed in shares to stockholders pursuant to the Company’s dividend reinvestment program.

For the year ended December 31, 2021, the Company declared and paid dividends in the amount of $44,942,937 of which $17,948,131 was distributed in cash and the remainder distributed in shares to stockholders pursuant to the Company’s dividend reinvestment plan.

Total distributions for the years ended December 31, 2021 and December 31, 2020 represented distributions from income and not return of capital.

On March 4, 2021, the Board of Directors declared a dividend in the amount of $0.37 per share payable on March 19, 2021 to stockholders of record as of March 5, 2021.

The following table reflects the distributions declared on shares of our common stock during the years ended December 31, 2021 and December 31,2020 and through March 2, 2022:

Distributions

December 31, 2022

First Quarter (through March 2, 2022)

March 8, 2022

March 22, 2022

December 31, 2021

First Quarter

March 5, 2021

March 19, 2021

Second Quarter

April 30, 2021

Third Quarter

July 20, 2021

August 12, 2021

Fourth Quarter

November 8, 2021

November 22, 2021

December 31, 2020

First Quarter

March 6, 2020

March 20, 2020

Second Quarter

Third Quarter

August 6, 2020

August 20, 2020

Fourth Quarter

October 1, 2020

November 12, 2020

We have elected to be treated, currently qualify, and intend to continue to qualify, as a RIC under Subchapter M of the Code.

While we intend to qualify to be treated as a RIC annually, we anticipate that we may have difficulty satisfying the asset diversification requirements as we deploy capital and build our investment portfolio.

If we fail to qualify as a RIC for any taxable year, we will be subject to corporate-level U.S.

federal income tax on any net taxable income for such year.

If we fail to qualify as a RIC for any taxable year, we will be subject to U.S.

federal income tax at corporate rates on any net taxable income for such year.

See “Business — Certain U.S.

Federal Income Tax Considerations” in Part I, Item 1 of this Form 10-K and “Note 2 — Summary of Significant Accounting Policies” to our financial statements in Part II, Item 8 of this Form 10-K for more information.

Income Tax Considerations” in Part I, Item 1 of this Form 10 K and “Note 2 — Summary of Significant Accounting Policies” to our financial statements in Part II, Item 8 of this Form 10 K for more information.

To maintain RIC tax treatment, we must distribute at least 90% of our net ordinary income and net realized short-term capital gains in excess of our net realized long-term capital losses, if any, to our stockholders.

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stockholder will be entitled to claim a credit equal to their allocable share of the tax paid on the deemed distribution by us.

The amount of the deemed distribution net of such tax will be added to such stockholder’s tax basis in such stockholder’s common stock.

The amount of the deemed distribution net of such tax will be added to such stockholder’s tax adjusted basis in such stockholder’s common stock.

Since we expect to pay tax on any retained capital gains at our regular corporate tax rate, and since that rate is in excess of the maximum rate currently payable by individuals on long-term capital gains, the amount of tax that individual stockholders will be treated as having paid and for which they will receive a credit will exceed the tax they owe on the retained net capital gain.

12 unchanged sentences

As a result of adopting such a plan, if our Board of Directors authorizes, and we declare, a cash dividend or distribution, our stockholders who have not opted out of our dividend reinvestment plan will have their cash dividends or distributions automatically reinvested in additional shares of our common stock, rather than receiving cash.

If newly issued shares are used to implement the dividend reinvestment plan, the number of shares to be issued to a stockholder will be determined by dividing the total dollar amount of the cash dividend or distribution payable to a stockholder by the market price per share of our common stock at the close of regular trading on the Nasdaq Global Select Market on the payment date of a distribution, or if no sale is reported for such day, the average of the reported bid and ask prices.

However, if the market price per share on the payment date of a cash dividend or distribution exceeds the most recently computed net asset value per share, we will issue shares at the greater of (i) the most recently computed net asset value per share and (ii) 95% of the current market price per share (or such lesser discount to the current market price per share that still exceeded the most recently computed net asset value per share).

If shares are purchased in the open market to implement the dividend reinvestment plan, the number of shares to be issued to a stockholder shall be determined by dividing the dollar amount of the cash dividend payable to such stockholder by the weighted average price per share for all shares purchased by the plan administrator in the open market in connection with the dividend.

The number of shares to be issued to a participant in the dividend reinvestment plan are rounded downward to the nearest whole number to avoid the issuance of fractional shares, and any fractional share otherwise issuable to a participant but for this provision is instead be paid to such participant in cash contemporaneously with the issuance of such shares in connection with such cash dividend.

No action will be required on the part of a registered stockholder to have his or her cash dividends and distributions reinvested in shares of our common stock.

A registered stockholder could instead elect to receive a dividend or distribution in cash by notifying RGC in writing, so that such notice is received by RGC no later than 10 days prior to the record date for distributions to the stockholders.

A registered stockholder could instead elect to receive a dividend or distribution in cash by notifying RGC in writing, so that such notice is received by RGC no later than five days prior to the record date for distributions to the stockholders.

RGC will set up an account for shares of our common stock acquired through the plan for each stockholder who does not elect to receive dividends and distributions in cash and hold such shares in non-certificated form.

9 unchanged sentences

Michigan Ave., Suite 4200, Chicago, IL 60601.

Price Range of Common Stock

Our common stock began trading on the Nasdaq Global Select Market on October 21, 2021 under the symbol “RWAY” in connection with our IPO of shares of our common stock.

Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares.

It is not possible to predict whether our common stock will trade at, above, or below NAV per share.

See “Item 1A.

Risk Factors—Risks Related to an Investment in Our Common Stock.” On March 2, 2022, the last reported closing sales price of our common stock on the Nasdaq Global Select Market was $13.34 per share, which represented a discount of approximately 8.9% to our NAV per share of $14.65 as of December 31, 2021.

Prior to our IPO, the shares of our common stock were offered and sold in transactions exempt from registration under the Securities Act.

As such, there was no public market for shares of our common stock during the year ended December 31, 2020 and through the period ended October 20, 2021.

The following table sets forth the most recent fiscal quarter's NAV per share of our common stock, the high and low closing sales prices of our common stock, such sales prices as a percentage of NAV per share and quarterly distribution per share.

Price to NAV (2)

per Share (3)

Fourth Quarter (4)

NAV per share is generally 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 sales prices.

The NAVs shown are based on outstanding shares at the end of each period.

Calculated as the respective high or low closing price less net asset value, divided by net asset value (in each case, as of the applicable quarter.

Represents the dividend or distribution declared in the relevant quarter.

Shares of our common stock began trading on the Nasdaq Global Select Market on October 21, 2021 under the trading symbol “RWAY.”

Stock Performance Graph

The following stock performance graph compares the cumulative stockholder return on our common stock from October 21, 2021 (the date our common stock commenced trading on the Nasdaq Global Select Market) to December 31, 2021, with that of the Standard & Poor’s 500 Stock Index, the NASDAQ Financial 100 Index, and the Wells Fargo BDC Index.

This graph assumes that on October 21, 2021, $100 was invested in our common stock, the Standard & Poor’s BDC Index, the NASDAQ Financial 100 Index, and the Wells Fargo BDC Index.

The graph also assumes the reinvestment of all cash dividends prior to any tax effect.

The graph and other information furnished under this Part II Item 5 of this 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 under, or to the liabilities of Section 18 of, the Exchange Act.

The stock price performance included in the below graph is not necessarily indicative of future stock performance.

COMPARISON OF CUMULATIVE TOTAL RETURN

Among Runway Growth Finance Corp., the Standard & Poor’s 500 Index,

The NASDAQ Financial 100 Index, and the Wells Fargo BDC Index

(1) Cumulative stockholder return is calculated on the closing stock prices for each respective date.

Recent Sales of Unregistered Securities and Use of Proceeds

Except as previously reported by us on our current reports on Form 8-K or quarterly reports on Form 10-Q, we did not sell any securities during the period covered by this Form 10-K that were not registered under the Securities Act.

Selected Financial Data

The following selected financial and other data for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 is derived from our audited financial statements.

The selected financial information and other data presented below should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K and with the audited financial statements and the notes thereto included in Part II, Item 8 of this Form 10-K.

Our historical results are not necessarily indicative of future results.

The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the financial statements and related notes included in this filing.

Income Statement Data:

Total investment income

Total operating expenses

Net investment income (loss)

Net realized gain (loss) on investments

Net change in unrealized appreciation (depreciation) on investments

Net increase in net assets resulting from operations

Per share data:

Net investment income (loss) (1)

Net increase in net assets resulting from operations (1)

Balance Sheet Data:

Non-control/non-affiliate investments at fair value

Control/affiliate investments at fair value

Investment in U.S.

Treasury Bills at fair value

Cash and cash equivalents

Accrued interest receivable

Other accounts receivable

Prepaid expenses

Credit facilities

Deferred credit facility fees

Reverse repurchase agreement

Accrued incentive fees

Due to affiliate

Interest payable

Accrued expenses and other liabilities

Total Liabilities

Total Net Assets

Total return based on Net Asset Value (2)

Net Asset Value per share (1)

Weighted average shares outstanding for period, basic

Dividends declared and paid

Per share data is based on average weighted shares outstanding, except where such amounts need to be adjusted to be consistent with what is disclosed in the financial highlights of our audited financial statements.

Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity