8-K: SuRo Capital Corp. Announces Second Quarter 2024 Results, Including New Investments and Debt Refinancing

SuRo Capital reported a net asset value of $6.94 per share as of June 30, 2024, and announced a note repurchase program and a new convertible note offering.

Summary

• SuRo Capital Corp. announced its financial results for the quarter ended June 30, 2024, with a net asset value of $6.94 per share, down from $7.17 per share at March 31, 2024, and $7.35 per share at June 30, 2023.
• The company's net assets totaled approximately $162.3 million as of June 30, 2024.
• During the second quarter, SuRo Capital made a $10.0 million investment in Canva, Inc. and a $15.0 million investment in CW Opportunity 2 LP, which is invested in CoreWeave, Inc.
• The company's board approved a repurchase program of up to $35.0 million for its 6.00% Notes due 2026.
• Additionally, the board approved up to $75.0 million of private 6.50% Convertible Notes due 2029, with an initial issuance of up to $25.0 million.
• SuRo Capital held positions in 39 portfolio companies with an aggregate fair value of approximately $182.9 million as of June 30, 2024.
• The top five portfolio company investments accounted for approximately 49% of the total portfolio at fair value.
• The company's liquid assets were approximately $57.6 million as of June 30, 2024.
• The company repurchased 2,000,000 shares at a price of $4.70 per share in a modified Dutch Auction tender offer.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the decrease in net asset value and net investment loss, but the company is taking steps to strengthen its balance sheet and has a positive outlook on its investment pipeline.

Positives

• SuRo Capital made strategic investments in Canva and CoreWeave, which are expected to strengthen the portfolio.
• The note repurchase program and convertible note offering are aimed at strengthening the balance sheet.
• The company has a significant amount of investable capital, approximately $55.0 million, for future opportunities.
• The company believes the market is currently undervaluing its portfolio.
• The modified Dutch Auction Tender Offer was an efficient and accretive deployment of capital.

Negatives

• The net asset value per share decreased from $7.17 at March 31, 2024, to $6.94 at June 30, 2024.
• The company experienced a net decrease in net assets resulting from operations of $10.7 million for the quarter.
• The company reported a net investment loss of $3.7 million for the quarter.
• There was a net realized loss on investments of $0.0 million for the quarter.
• The company experienced a net change in unrealized depreciation of investments of $7.0 million for the quarter.

Risks

• The market has become volatile due to domestic and global factors, which could impact the company's investments.
• The company's portfolio includes private companies, which may be subject to lock-up provisions and market fluctuations.
• The company's investments are subject to market risk and may not perform as expected.
• The company's ability to execute its investment strategy depends on market conditions and the availability of suitable investment opportunities.

Future Outlook

SuRo Capital remains enthusiastic about its investment pipeline with nearly $55.0 million in investable capital and believes its portfolio is well-positioned for the re-opening of the IPO window. The company also believes the market is currently undervaluing its portfolio.

Management Comments

• Mark Klein, Chairman and CEO, stated that private technology companies continued to see increasing interest from investors in the second quarter.
• Mr. Klein mentioned that the company remains enthusiastic about its investment pipeline with nearly $55.0 million in investable capital.
• Mr. Klein believes the refinancing of a portion of the current debt to a longer-dated convertible instrument with favorable terms strengthens the balance sheet.
• Mr. Klein concluded that the recently completed Modified Dutch Auction Tender Offer was an efficient and accretive deployment of capital.

Industry Context

The announcement comes amid a volatile market environment, with investors becoming increasingly confident in the prospect of rate cuts, but also experiencing a sharp change in sentiment due to domestic and global factors. The company's focus on private technology companies aligns with the broader trend of increased investor interest in this sector.

Comparison to Industry Standards

• SuRo Capital's net asset value per share decreased from $7.17 to $6.94 during the quarter, which may be compared to other Business Development Companies (BDCs) or investment funds that focus on private equity and venture capital.
• The company's investment in Canva and CoreWeave is similar to other BDCs that are investing in high-growth technology companies.
• The note repurchase program and convertible note offering are common strategies used by BDCs to manage their capital structure and debt obligations.
• The company's portfolio composition, with 49% of its value concentrated in the top five investments, is a typical characteristic of BDCs that focus on concentrated investments in high-growth companies.
• The company's modified Dutch Auction tender offer is a common method for BDCs to repurchase shares when they believe their stock is undervalued.

Stakeholder Impact

• Shareholders may be impacted by the decrease in net asset value per share.
• Shareholders may benefit from the note repurchase program and the potential for increased value if the company's portfolio is undervalued.
• Creditors may be impacted by the new convertible note offering and the note repurchase program.
• Employees may be impacted by the company's overall financial performance and strategic decisions.

Next Steps

• The company will issue up to $25.0 million of the 6.50% Convertible Notes due 2029 on or about August 14, 2024.
• The company may repurchase up to $35.0 million of its 6.00% Notes due 2026 through open market purchases.
• The company will continue to evaluate investment opportunities and manage its portfolio.
• The company will hold a conference call and webcast for investors on August 7, 2024.

Key Dates

Keywords

SuRo Capital, investment, net asset value, convertible notes, note repurchase, portfolio companies, private equity, venture capital, Canva, CoreWeave