John Barry, CEO and major shareholder of Prospect Capital (PSEC), has been a repeat buyer of shares in recent weeks. He’s bought over 3 million shares in a series of transactions this month, paying over $12 million. Two company directors have also been accumulating shares in recent weeks.
Going further back, company insiders have had a few dozen insider buys, including multiple buys from the company COO and CFO. There have been no insider sales over the past two years.
Overall, Prospect Capital insiders own 28.5% of shares.
The business development company (BDC) is down 22% over the past year, as revenue growth has slid by 12% and as the company has had to report some losses on its businesses.
Prospect shares have also been weighed down by their plans to issue more shares to raise capital below book value. Currently, shares trade at about 0.5 times their book value, indicating that shares are either undervalued, or that Prospect’s investments were overvalued at the time of purchase.
Action to take: As a business development company, Prospect pays out almost all of its income as a dividend, and currently pays 12.7%.
However, that dividend can and has been cut in the past. Investors looking for high yields from a BDC company can find lower, but safer, yields elsewhere.
For traders, with shares trending lower, the August $4.00 puts, last trading for about $0.25, could see mid-double-digit returns in the coming months.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.