Hercules Capital Faces Lawsuit Over $5.7B Software Loan Misclassification; Shares Plunge 7.9%
Hercules Capital is sued over allegedly understating its $5.7B portfolio’s software loan exposure by reclassifying software companies into other industry categories, concealing concentration risk. Shares dropped $1.22 (7.9%) to $14.21 on February 27 after revelations, and May 19 is the deadline for lead plaintiff applications.
1. Allegations of Misclassification
A securities class action asserts that Hercules Capital systematically misclassified software sector loans within its $5.7B portfolio by assigning software borrowers to non-software categories in quarterly SEC filings. This practice allegedly obscured concentration risk and maintained par valuations despite industry-wide distressed software debt.
2. Market Reaction and Share Decline
HTGC shares dropped $1.22, or 7.9%, to close at $14.21 on February 27, 2026, after the alleged misclassification and valuation discrepancies surfaced. Investors raised concerns over the transparency of portfolio diversification and the reliability of reported Net Asset Value.
3. Class Period and Legal Deadlines
The lawsuit covers investments made between May 1, 2025, and February 27, 2026, when corrective information reached the market. The court set May 19, 2026, as the deadline to apply for lead plaintiff status, enabling shareholders to seek recovery of potential investment losses.