Investment Manager Rebalances, Trims Stake in Hercules Capital

Sound Income Strategies, LLC disclosed the sale of 177,473 shares of Hercules Capital (NYSE:HTGC) for an estimated $3.40 million in an SEC filing dated October 10, 2025.

What Happened

According to a filing with the Securities and Exchange Commission dated October 10, 2025, Sound Income Strategies, LLC reduced its stake in Hercules Capital by 177,473 shares during the quarter ending on September 30, 2025. The estimated transaction value, based on the average closing price for the quarter, was approximately $3.40 million. Following the sale, the fund reported holding 2,752,867 shares at quarter-end.

What Else to Know

This reduction in the Hercules Capital position now accounts for 2.6% of Sound Income Strategies, LLC's reportable U.S. equity assets.

Top holdings after the filing:

• NYSE:TSLX: $50.57 million (2.8% of AUM) as of September 30, 2025
• NASDAQ:ARCC: $47.33 million (2.6% of AUM) as of September 30, 2025
• NYSE:HTGC: $46.96 million (2.6% of AUM) as of September 30, 2025
• NASDAQ:GBDC: $45.58 million (2.5% of AUM) as of September 30, 2025
• UNK:SHYG: $42.91 million (2.4% of AUM) as of September 30, 2025

As of October 9, 2025, shares were priced at $17.06, down 15.17% over the past year. Hercules Capital stock has underperformed the S&P 500 by 23.78 percentage points over the past year.

Company Overview

Company Snapshot

Hercules Capital provides venture debt, senior secured loans, and growth capital, primarily to privately held, venture capital-backed companies across technology, life sciences, and sustainable energy sectors.

The company targets emerging and growth-stage companies in the United States, with a focus on technology, life sciences, and energy technology firms seeking flexible financing solutions.

It serves a customer base of innovative, high-growth companies that require customized funding to support expansion and liquidity needs.

Hercules Capital is a leading provider of specialized financing solutions for innovative, high-growth companies, leveraging structured debt and equity investments to support expansion and liquidity needs. Its competitive advantage lies in deep sector expertise and the ability to deliver customized funding to underserved segments of the venture ecosystem.

Foolish take

Sound Income Strategies trimmed its stake in Hercules Capital during the third quarter, selling nearly $3.5 million worth of Hercules stock. That may seem like a very large sale -- and it is by most retail standards -- but for a investment advisory firm like Sound Income, which has more than $1.8 billion in assets under management, this sale represents just an adjustment.

As for Hercules, the stock has endured a difficult 12 months. Shares have posted a total return of (6.2%), which is far worse than the S&P 500 over that same period, which posted a total return of 14.2%. The company, which operates as a key lender to the venture capital ecosystem, appears to have fallen out of favor with the broader market, with shares falling by nearly 15% in the last month alone.

Nonetheless, the average investor shouldn't get the wrong idea about this sale. As of September 30, Sound Income retains more than 2.7 million shares, making Hercules its third-largest position. In other words, this looks like institutional noise, rather than a significant directional call by the fund managers.

Glossary

13F AUM: The total value of assets under management reported by institutional investment managers in quarterly SEC Form 13F filings.
AUM (Assets Under Management): The total market value of all investments managed by a fund or investment firm.
Venture debt: Loans provided to early-stage, venture capital-backed companies, often as an alternative or supplement to equity financing.
Senior secured loans: Loans backed by collateral and given repayment priority over other debts if the borrower defaults.
Growth capital: Funding provided to mature companies to expand operations, enter new markets, or finance significant acquisitions.
Dividend yield: Annual dividend income expressed as a percentage of the current share price.
Trailing: Refers to performance or data measured over a past period, often the previous 12 months.
TTM: The 12-month period ending with the most recent quarterly report.
Structured debt: Customized loan arrangements with specific terms, often including features like warrants or convertible options.
Liquidity needs: The requirement for cash or easily accessible funds to meet short-term obligations or opportunities.
Venture capital-backed companies: Firms that have received investment funding from venture capital firms to support growth and development.
Customized funding: Tailored financing solutions designed to meet the unique needs of specific companies or situations.

Jake Lerch has positions in Ares Capital. The Motley Fool has positions in and recommends Sixth Street Specialty Lending. The Motley Fool has a disclosure policy.