BDC COMMON STOCKS

Week 23

Left Behind

This week at least, the major indices were marching onward and upward, leaving the BDC sector in their dust.

Despite the encouraging macro news – which should benefit the thousands of BDC-financed borrowers as well as everyone else – the BDC sector’s stock prices moved up only modestly.

Our number one price guide for the sector – the performance of the exchange traded fund with the ticker BIZD – increased just 0.2%, and the S&P BDC Index – on a price only basis – was much the same.

Of the 46 BDCs whose prices we track week in and out, 22 were up or flat since last Friday and 24 were down.

Two BDCs reported outsized price increases of greater than (3.0%) but the number going down by greater than (3.0%) was twice as high.

Higher

For reasons we cannot fathom, the newest public BDC of all – MSC Income Fund (MSIF) – jumped in price by 9.7% this week.

Every chart tells a story and here’s MSIF’s:

On June 4, 2025 the volume of shares traded was 6x its average level and 12x the number the day before.

Now We Speculate

Maybe an institutional investor has decided that quiet, slow accumulation is over-rated or an analyst with a huge following has upgraded the stock.

We’ll have a lot more to say when discussing whether MSIF is a “Best Idea” when writing for our eponymous publication later this week-end.

SUBSCRIBE TO BDC BEST IDEAS

Come-Back Kid

The other BDC moving up in price was TriplePoint Venture Growth (TPVG) – which increased 3.3%.

This continues a trend that began in early April, a month before the BDC reported its IQ 2025 results.

Many investors believe that the venture-debt BDC whose Net Asset Value Per Share (NAVPS) has dropped by a third in the last 5 years has turned the corner performance-wise.

Investor optimism must have been compounded when TPVG reported a 1 cent increase in its NAVPS in the quarter ended March. 31, 2025.

Hope Springs Eternal

Not to be a wet blanket and without any reference to fundamentals, we should point out that this is the 12th time investors have bid up the BDC’s stock price since the end of 2021, only to be disappointed.

Downward

The 4 BDCs down in price by (3.0%) or more were led by Gladstone Investment (GAIN)

That’s interesting because GAIN has been the “hottest” BDC stock of 2025 on the back of its huge “special”: dividend announced earlier.

However, that dividend has now come and gone and GAIN – whose price peaked at $15.32 on June 2, closed the week at $13.91.

All that too-ing and fro-ing for a $0.54 distribution…

Maybe

We’d explain the CION and CCAP price drops in terms of their recent poor fundamental performance.

We wrote an article back in March whose headline says it all: “CION Investment Reports Mediocre Results“

Over at BDC Best Ideas, when discussing CCAP’s IQ 2025 results, we had this to say recently:

Over the last 5 years, CCAP has been one of a minority of BDCs that has managed to increase its NAVPS and at an average of 3.8% per annum. However, that was then and this is now, and for 4 quarters in a row NAVPS has been dropping. In 2024, the total percentage loss was (0.3%). Optimistically, we presumed the BDC would not lose more than (1.0%) in 2025.

However, in the IQ 2025, NAVPS fell an uncharacteristically high (1.8%). Realized and unrealized losses came to ($13mn), equal to about four-fifths of Net Investment Income as a number of portfolio companies were written down. Moreover…recurring earnings dropped so much that dividend payouts exceeded earnings, also eroding NAVPS.

Source: BDC Best Ideas

Different

We can’t blame Barings BDC’s (BBDC) recent results on this week’s price dip.

Maybe a number of negative articles by BDC pundits in recent weeks has chipped away at investor confidence. Here are some the headlines from Seeking Alpha:

Over at BDC Best Ideas, we have a very different take if anyone is interested.

WHERE WE ARE

Not So Good. Not So Bad.

We are nearly at the half way mark and BIZD is down (2.8%) in price on the year.

By comparison, the S&P 500 is up 2.0%.

Going by the S&P BDC Index – and taking into account dividends paid to date – the total return is down (0.4%), while the S&P, including dividends, is up 2.6%.

In cycling terms, the BDC sector is behind the peloton of the major indices but not so far that they can’t make it back before year’s end.

At this point, only 8 BDCs are trading up in 2025 (including MSIF, which joined us after the year began) but only 10 BDCs are down in price by (10%) or more.

The number of BDCs trading at or above their NAVPS is 13, neither very high nor very low by comparison with what has come before.

WHERE WE ARE HEADED

Into The Unknown

Still unclear to us, the Fed and everyone else is how the new rules of the game – which are still being written as play goes on – will impact the economy and affect the financial performance of companies large and small.

The earliest indications we’ve received – including readings on inflation and unemployment – have been inconclusive but certainly have not supported the predictions of the more pessimistic pundits.

If there’s a freight train of recession headed our way, it’s hard to discern.

In the interim – going by what we heard on recent BDC conference calls and what we’re seeing of new loans being booked – business is going on as usual.

It Could Happen

Should the not unreasonable concerns about the future state of the economy fade away by year’s end, there is plenty of room for the sector to bounce back towards its price heights set in February.

At this point, BIZD sits (9.5%) off its 52 week high and most BDCs are a similar or greater percentage below their 2025 peaks.

For example, BBDC is (18%) off, BCSF (19%), and CSWC (23%).

BDCs that have under-performed are much further behind their peak price: (42%) for PSEC – for example.

As far as the BDC Reporter is concerned a resilient economy is the most likely background scenario, accompanied by more or less the same level of interest rates as we enjoy now late into the year.

That leaves open the possibility that BDC prices could yet ignite and investors in most BDCs could yet have a very good year where a total return is concerned.

That’s doubly the case if the major indices continue to climb in price.

Other Possibilities

Of course, there are an endless number of other scenarios.

The worst one remains an economic downturn of unknown severity and duration, which is accompanied both by lower interest rates as the Fed attempts to rescue us with its favorite tool and a significant rise in loan defaults to a level that we’ve not seen in many years.

It’s hard to imagine that BDC prices would do anything but drop considerably when faced with such conditions.

All we can say to anyone worrying is that i) we’ve gone over 15 years without those sort of challenges, and ii) there is no tangible evidence in the entire non-investment grade space – not just the BDC sector – that even the beginnings of such a state of affairs is underway.

Investors headed to the sidelines on concerns of a disaster to come are just guessing and could be losing out in the here and now on BDC yields in the low double digits and on a potential resurgence in prices when the all-clear sounds.

We get the impression that most BDC investors at this point are happy enough to remain long the sector at its current level but are not going through their seat cushions looking to put more money to work.