Prospect Capital: A Tale of Strong Fundamentals and a Struggling Stock

The investment story at Prospect Capital presents a puzzling contradiction. While this business development company (BDC) is delivering robust quarterly results and maintaining a strong balance sheet, its share price tells a dramatically different story. Despite successful execution of its corporate strategy, the equity faces a significant crisis of investor confidence, leaving market participants to wonder if a genuine recovery is possible.

Prospect Capital’s recent strategic pivot toward conservatism is showing measurable results. The company has dramatically reshaped its investment portfolio, increasing its allocation to first-lien secured loans to 71.1%. Concurrently, it has nearly eliminated its exposure to riskier structured equity investments, reducing them from 8.4% in June 2024 to just 0.3% by September 2025.

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