Ares Capital Corporation reports Q2 results on July 29 with the lending market for its shares notably tighter than usual, even as short sellers have begun trimming positions into the print.
The most immediate signal is in borrow availability. Only about 9.4% of the lending pool remains unused — meaning roughly one share is still available for every ten already borrowed. That reading has dropped sharply from around 15–21% just two weeks ago, and the 52-week low reached 0.78%, so the current level is historically tight without being extreme. Cost to borrow has been volatile, swinging between roughly 4% and 7% through July before settling near 4.5%. Despite that tightening, short sellers have actually been pulling back — shares short fell about 4.5% in a single session on July 24, and are down roughly 3.5% over the week, reversing a 10% build over the prior month. The ORTEX short score of 72.3 reflects elevated bearish sentiment in a relative sense, but the recent covering suggests some of that pressure is unwinding ahead of the release. Options positioning is calm: the put/call ratio of 1.36 is barely above its 20-day average of 1.34, with a z-score near 0.6 — nothing that signals unusual hedging demand. The stock itself is up about 3.8% over the past month, closing at $18.89, though it gave back a small amount over the past week while the broader BDC peer group — , , — saw similar or larger weekly declines of 2–4.5%.
The analyst debate centres on credit quality in ARCC's software loan book, and recent moves have leaned cautious. Wells Fargo downgraded to Equal-Weight in mid-June and trimmed its target to $19. JP Morgan kept its Overweight rating but cut its target to $18.50 on July 2 — the most recent note from a bellwether firm, and one that effectively puts the target below the current share price. Across the past several months, most firms have maintained positive ratings while steadily walking down price targets, a pattern that signals residual conviction on the franchise but diminishing enthusiasm on near-term returns. The bull case rests on Ares's scale advantage, senior-secured loan focus, and non-accruals that remain below long-run averages. Bears focus on the mixed core net interest income result from the prior quarter and the risk that negative sentiment around software lending lingers regardless of the underlying credit numbers. The consensus mean target of $22.75 implies meaningful upside from current levels, but several individual targets have now migrated to the $18–$19 range, closer to where the stock is trading.
One institutional footnote worth noting: STRS Ohio entered as a new holder with 10.5 million shares in the March quarter, a position large enough to rank among the top holders by count. UBS Asset Management and Two Sigma also added meaningfully, while Morgan Stanley trimmed. The buying cluster among insiders in February — CEO, CFO, COO, and a director all purchased within days of each other at prices around $19.10–$19.29 — is now stale as data (169 days old) but established a reference point: management was willing to buy at levels just above where the stock trades today.
The July 29 print is ultimately a test of whether ARCC can show stabilisation in core NII and credit metrics that convinces a cautious analyst community to stop cutting targets — or whether further softness in the software loan book gives bears fresh ammunition at a moment when borrow availability is already running tight.
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