Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) continues to exhibit an unfavorable risk and reward profile, with deteriorating financial performance and significant challenges in the venture capital ecosystem [3][4][6] Financial Performance - Q2 2024 investment income was $26 million, down from $28 million in the prior year, translating to $0.36 per share compared to $0.54 per share in Q2 2023 [5] - NAV per share declined from $9.65 in Q1 2024 to $9.12 in Q2 2024, driven by high financing costs and a shrinking portfolio size [5] - The portfolio size decreased as loan repayments of $34 million outpaced new debt investments of $11 million during the quarter [5] Market Dynamics - The venture capital market is facing a significant lack of exit opportunities, impacting the ability of VC-backed companies to return capital to investors [5] - Current yield levels for new investments are lower than the overall portfolio yield, with onboarding yields at 13.7%, approximately 220 basis points below the portfolio average [5] Leverage and Risk - HRZN's debt to equity ratio stands at 1.36x, approximately 18% above the sector average, indicating elevated financial risk [5] - The company trades at a premium over NAV with a P/NAV of ~1.24x, allowing for potential share issuance to pay down debt and fund new investments [5] Dividend Coverage - Dividend coverage is at ~109%, providing minimal margin of safety, with expectations that HRZN may need to revisit its dividend policy by the end of 2024 or early 2025 [6]
Horizon Technology: Edging Closer To A Potential Dividend Cut