PSEC

Prospect Capital ($PSEC) CEO Bets Big: $60 Million in Insider Buys Despite Stock Slump - Is 48% Discount to NAV an Opportunity?

03/27/2025 07:34

Prospect Capital ($PSEC) CEO John Barry has been on a notable buying spree in recent months, attracting investor attention as he continues to pour significant capital into the company despite its struggling share price. This $1.9 billion business development company (BDC) has seen its stock decline more than 23% over the past year, yet its top executives keep putting their personal money on the line. $PSEC shares have experienced considerable volatility over the past year. Trading around $5.0 in June 2024, the stock plummeted to the $4.4 range by mid-August. A brief recovery to $5.2 in mid-September was followed by another sharp decline to $4.1 in early November, with recent trading hovering around $4.2. Amid this downward trajectory, CEO John Barry's persistent and substantial share purchases stand out dramatically. From late August through early September 2024, Barry acquired approximately 5.5 million shares at an average price of $5.25, representing a total investment of about $29 million. Notably, on August 30 alone, he purchased 2.5 million shares for $12.95 million. When the stock plunged again in November, Barry doubled down, acquiring approximately 5 million additional shares between November 14 and November 22 – just nine trading days – investing roughly $23 million. He followed with another 2 million shares for $8.58 million on December 24, and most recently added about 3 million more shares for $13 million in March 2025. Barry isn't alone in his bullish stance. COO M. Grier Eliasek has been consistently purchasing 5,000 shares almost daily from September through December, with larger acquisitions of 210,000 shares for approximately $1 million each on November 27 and 29. CFO Kristin Lea Van Dask and Director William Gremp have also made smaller purchases. The scale of these insider purchases is remarkable. CEO Barry alone has invested in approximately 13 million shares worth over $60 million in the past seven months, representing about 3% of the company's outstanding shares. What might explain this aggressive insider buying? One notable factor is the significant discrepancy between the current share price and the company's Net Asset Value (NAV). As of September 30, 2024, $PSEC reported a NAV of $8.10 per share, nearly double the current trading price of $4.23. This represents a discount of approximately 48% to NAV. Additionally, $PSEC currently pays a quarterly dividend of $0.05, translating to an annualized yield of 12.68% – an attractive proposition for income-focused investors. In October 2024, the company announced it had extended and increased its revolving credit facility to over $2.1 billion, with a maturity date of June 2029. This move should strengthen the company's liquidity position and enhance its investment capabilities. However, investors should consider several risk factors. For the quarter ended September 30, 2024, the company reported a net decrease in assets of $134 million, with a net decrease in assets applicable to common stockholders of $165.1 million, suggesting challenges within its investment portfolio. Furthermore, the current high-interest rate environment and economic slowdown concerns could create additional pressure for BDCs like $PSEC, which typically provide loans and investments to middle-market companies that may be more vulnerable during economic downturns. In conclusion, the persistent and substantial insider buying at $PSEC, particularly by its CEO, sends a clearly positive signal. The commitment demonstrated by Barry and other executives through their repeated significant investments is noteworthy. However, investors should carefully examine the company's deteriorating financial performance and the underlying causes of its continued share price decline. While the significant discount to NAV and high dividend yield appear attractive, careful analysis is needed to determine whether these metrics can be sustained.

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