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Prospect Capital: Insider Purchases Since 2010

  • Prospect Capital (PSEC) published a routine presentation on September 2, 2016.
  • The BDC Activist highlights: Noted that insiders have purchased $131.5mn from January 2010 to April 2016.
  • Far higher than peers and BDC median by this metric.
  • [Aside: As the BDC Activist has reported previously vastly under-performing Apollo Investment-AINV-insiders  bought lowest amount: $2.2mn, less than half BDC median of $4.8mn].
  • Still, PSEC insiders own “only” 6.3% of Company.
  • Presentation fails to mention bulk of PSEC insider shares purchased are by one individual: CEO and owner of the External Manager.
  • The latest Proxy shows 94% of insider shareholding owned by CEO John Barry. See page 5.
  • Remainder of senior management and Board far less invested.
  • Director William Gremp owns just 4,250 shares and Director Andrew Cooper zero.
  • All Non Interested Directors as a class own 35,259 shares out of 359mn shares outstanding.
  • Total PSEC “insider” purchases in 64 month period mentioned equal to 3.5 months of management and incentive income received.
  • BDC Activist says: “There is a glass half full or half empty element to these oft quoted stats by Prospect Capital arguing alignment between managers and shareholders. Include John Barry’s holdings, insiders have substantial purchases and stake in PSEC. Don’t include Mr Barry, and PSEC has below BDC median insider exposure”.
  • Adds:” Shareholders will have to make up their own mind if they are impressed with PSEC insider commitment to shareholding or disappointed.”
  • Ends: “For our part, Mr Barry’s ownership suggests as much marketing and retaining control as confidence in the Company’s outlook. Concern accentuated by the very modest ownership by resat of insiders as a group, and especially by the “independent” directors.