Learn more about Main Street Capital (MAIN), a BDC that trades on the New York Stock Exchange.
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- Historical NAV per share
- Historical NII per share
- Historical underwriting performance
- Company history
Main Street Capital’s (MAIN) Net Asset Value (NAV)
- Main Street Capital’s historical NAV per share has vastly outperformed the BDC average. The primary reason for Main Street Capital’s growth in NAV per share is accretive stock issuance at prices above NAV. MAIN reported that accretive offerings drove about 75% of its NAV growth, while the remaining 25% was driven by “retained earnings” in the form of unrealized gains on its investment portfolio, or NII not yet distributed to shareholders.
- Growth in net asset value per share has slowed as incremental equity issuance has a smaller impact on NAV per share. Furthermore, MAIN’s best underwriting results came from its early investments in lower middle market companies through its SBICs. These pre- and post-financial crisis equity investments will be difficult to duplicate. Additionally, losing investments in Oil & Gas weighed on its portfolio in 2015 and 2016. Located in Houston, Texas, Main Street Capital has more exposure to energy prices than other BDCs.
Main Street Capital’s (MAIN) Net Investment Income (NII)
- MAIN’s NII growth is largely the result of accretive stock issuance. Net asset value and net investment income are inherently intertwined. Growth in NII should follow growth in NAV per share. In other words, MAIN’s ability to issue stock above NAV led to NAV and NII growth.
- Main Street Capital’s net investment income growth is driven by interest income, in addition to dividends paid by its portfolio companies. In recent years, dividend income has been a large contributor to NII. Main Street Capital’s most successful investment in a company known as CBT Nuggets rewards it with millions of dollars in annual dividend income. Again, its early vintages are the big producers in dividend income just as they are contributors to capital gains.
- Main Street Capital’s asset management business also contributes to MAIN’s NII per share. Its ability to grow the HMS Income Fund plays an important role in its operating income. Learn more about the asset management business it launched in 2012 on the company’s timeline.
Main Street Capital’s (MAIN) Underwriting History
- Main Street Capital’s underwriting performance has been excellent. The company has reported net realized gains in a majority of annual periods since its initial public offering. The company’s net realized gains stand in stark contrast to other BDCs that have generally recorded more realized losses than gains over history.
- An increase in non-accrual assets ultimately led to sizable losses in 2015. The company’s exposure to Oil & Gas companies may continue to bring realized losses going forward.
- In 2016, three substantial exits fueled an increase in net realized gains. Main Street Capital sold Southern RV, Samba Safety, and Travis Acquisition at a gain in 2016, helping its results during the fiscal 2016 year.
Main Street Capital (MAIN) History
- 2002 — Main Street Capital starts out as a Small Business Investment Company (SBIC). The fund that would become Main Street Capital Corporation was an SBIC known as Main Street Mezzanine Fund, LP, which contained private capital leveraged by government subsidized borrowings through the Small Business Administration.
- 2007 — The IPO filing. Main Street Capital files for its IPO. Documents show that it has investments in just 27 companies. At the time of its IPO, Main Street Capital will become internally-managed. In effect, the combined interests of Main Street Mezzanine Fund, and its external manager, Main Street Capital Partners, LLC, will merge to become the internally-managed business development company Main Street Capital Corporation. The documents point to an IPO price of $15 per share, with $13.95 going to the company after a 7% underwriting fee ($1.05 per share). However, due to the purchase of its management company and contract, Main Street Capital notes that it would have an NAV of about $13.47 per share. Main Street Capital invests in more equity than the average BDC. At the time of IPO, it owned 22% of the companies in which it had an equity stake. Equity investments are central to its business model.
- 2009 — Government’s gives more leverage to Main Street Capital. In 2009, the U.S. Government increases the maximum leverage available to SBICs to $225 million. SBIC leverage is the best kind of leverage for BDCs, as it is inexpensive, and long lasting due to the 10-year tenor of SBIC debentures. Main Street Capital gets to work to ensure that it can deploy this additional leverage.
- 2010 — Main Street buys majority (88%) of its last private fund. Main Street Capital II, another SBIC managed by the principals of Main Street Capital, is sold to Main Street Capital Corporation. This gives the publicly-traded BDC more access to capital, and another SBIC license on which it can make the most of low-cost government leverage.
- 2011-2013 — Solid underwriting results and operating leverage play out. The company’s internal management structure make it one of the most efficient BDCs, as it spends less of its total investment income on operating expenses. Meanwhile, its equity positions acquired in the downturn start to generate substantial capital gains. In 2013, the company announces the payment of special dividends to distribute realized capital gains during the recovery years. Buying out its external manager as part of the IPO may have been the best money ever spent.
- 2012 — Main Street Capital becomes an asset manager. In May 2012, Main Street Capital announces a deal under which it will manage a private BDC by the name of HMS Income Fund. The company collects half of the management and incentive fees earned on the fund, and by 2016, the BDC has $988 million of assets under management.
- 2014 — The big leagues and investment-grade ratings. For the first time, Main Street Capital receives an investment-grade rating from Standard & Poors. The IG-rating enables Main Street Capital to issue its first institutional bond in the amount of $175 million, at just 4.5% interest. A year earlier, it issued 10-year debt at 6.25%.
- 2016 — MAIN receives a third SBIC license. Main Street Capital taps in to its third SBIC license, giving it the ability to borrow up to $350 million in total from the SBIC debentures program.