PSEC

Prospect Capital ($PSEC) CEO Buys $60 Million in Shares During 7-Month Stock Slide, Despite 14% Dividend Yield Credit Rating Falls to Junk

03/20/2025 20:06

Business Development Company $PSEC (Prospect Capital) CEO John Barry has been on an extraordinary share purchasing spree, acquiring approximately 14 million shares worth $60 million over the past seven months. This remarkable display of confidence comes as the company faces stock price declines and financial challenges. PSEC's stock has fallen approximately 18% over the past eight months, dropping from around $5.10 to the $4.20 range, with particularly steep declines in early August and early November 2024. During each of these declines, CEO Barry responded with massive share purchases. From late August through mid-September 2024, Barry acquired over 5 million shares worth approximately $26 million. Then in mid-November, he purchased another 7 million shares worth roughly $32 million. Additional purchases of 2 million shares in December 2024 and 2.7 million shares in March 2025 followed. Remarkably, the CEO isn't alone in his buying confidence. COO Grier Eliasek has consistently participated in the buying pattern since August 2024, initially purchasing 5,000 shares daily before transitioning to larger blocks of 210,000 shares (about $1 million each) in late November and early December. CFO Kristin Lea Van Dask and several directors have also made purchases. Prospect Capital is a Business Development Company that provides private debt and equity investments to middle-market companies. In October 2024, the company announced an extended revolving credit facility with aggregate commitments exceeding $2.1 billion, with maturity extended to June 2029. Despite this apparent growth in financing capabilities, the company faces significant financial headwinds. Recent financial data shows an annual net loss of $91.22 million, with earnings per share at negative $0.21. Additionally, S&P downgraded PSEC's credit rating to junk status, citing portfolio turbulence and liquidity pressures. One of the most intriguing aspects of PSEC is its substantial 14.63% dividend yield. While the annual $0.63 per share dividend is attractive to investors, recent dividend reductions and negative earnings raise questions about the sustainability of such high payouts. While insider buying is typically considered a positive signal, this case requires more nuanced analysis. Despite CEO Barry's massive purchases, the stock continues to trend downward, suggesting the market is giving more weight to the company's fundamental challenges. The PSEC situation illustrates the complex relationship between insider trading and corporate value. On one hand, it's a powerful signal that management is willing to bet tens of millions of dollars on their company's future. On the other hand, if these purchases don't translate into improved financial performance, they may simply represent an effort to support the stock price. Investors evaluating PSEC should carefully weigh the attraction of high dividend yields against the company's financial vulnerabilities. The next two to three quarters of financial performance will likely be crucial indicators of the company's true direction. Until then, the stock may continue to be caught between management's confidence and the market's skepticism.

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