Hercules Capital enters the post-earnings session with the most crowded lending market of the past year — every share in the borrow pool is now spoken for, and shorts are paying sharply more for the privilege.
The borrow squeeze is the week's defining story. Availability has dropped to 0% — the lending pool is fully exhausted, matching the 52-week tightest reading. Cost to borrow has more than tripled in five trading sessions, climbing from 0.77% on April 28 to 2.44% today. That's a 217% jump in one week. Short interest itself is up modestly — 7.0% of the free float, a tick higher than last week's 6.9% — but the direction is clear: more shorts are building positions even as the borrow market seizes up. The combination of rising SI and vanishing supply is a classic tension point.
The catalyst behind the week's activity is a fresh earnings print. Hercules reported Q1 results on May 5, beating estimates on record new commitments. The stock has responded: up 5.9% on the week and 11.2% over the past month, recovering to $16.57 from the mid-April lows around $14.74. That rebound hasn't deterred shorts — it may be encouraging some of them, given the ORTEX short score of 64.6, a consistently elevated reading that has barely moved in the past two weeks. Separately, a securities class action deadline falls on May 19, adding a background legal overhang that could weigh on sentiment heading into June.
The options market describes a structural put bias rather than fresh panic. The put/call ratio of 2.38 is running just slightly below its 20-day average of 2.43, with a z-score of -0.57. That marks a modest easing from the defensive posture seen in mid-to-late April, when the PCR touched 2.65. The 52-week range runs from a low of 0.40 to a high of 3.02, so the current reading is well above neutral but not at extremes. Income investors are providing a partial counterweight: the 12-month forward yield is running at 9.8%, and a special dividend of $0.07 was announced April 30, payable May 21.
Analyst moves over the past few weeks tell a story of modest reset rather than conviction. Piper Sandler nudged its target up to $17 from $16.50 today — maintaining Neutral — the first upward revision after a string of cuts from multiple firms through February and March. KBW trimmed to $18 in mid-April; Citizens cut to $22 from $24 a week later; UBS took its target all the way down to $15 in March. The mean price target of $19.31 implies roughly 17% upside from current levels, but the direction of travel in targets has been consistently southward until today's Piper move. The PE of 8.5x and price-to-book of 1.32x frame the stock as modestly valued relative to a BDC with a strong dividend score (91st percentile) but below-median forward earnings momentum (18th percentile on 90-day EPS momentum). Closest peers OBDC and TSLX gained 4.8% and 3.1% respectively on the week — both strong, but neither matching HTGC's 5.9% bounce.
The CEO holds 2.5 million shares and added 251,889 net in the reported 90-day period — a meaningful commitment. The cluster of insider sales on April 9 at $14.74, covering the CFO, COO and compliance officer, looks more like a tax or compensation-plan event than a directional signal: the trade significance scores were all rated 1 out of 10, and the CEO's simultaneous purchase of stock over the broader period is the more substantive data point.
What to watch next: the June 18 earnings call will test whether Q1's record commitment pipeline translates into sustained net investment income, and whether the tightened borrow market forces any short covering — or deepens if the legal overhang generates fresh selling pressure into the class action deadline.
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