RAND Capital's Net Assets Plummet on Investment Losses

Ticker: RAND · Form: 10-Q · Filed: 2025-11-07T00:00:00.000Z

Sentiment: bearish

Topics: Investment Losses, Unrealized Depreciation, Net Asset Decline, BDC, Private Equity, Financial Performance, Portfolio Valuation

TL;DR

**RAND's portfolio is bleeding value; get out before it's too late.**

AI Summary

RAND Capital Corp. reported a significant net decrease in net assets from operations of $9,125,901 for the nine months ended September 30, 2025, a stark contrast to the $11,773,670 increase in the prior year period. This decline was primarily driven by a net realized loss on sales and dispositions of investments of $2,001,997 and a substantial net change in unrealized depreciation on investments of $11,812,832 for the nine months ended September 30, 2025. Total investment income also decreased to $5,189,824 for the nine months ended September 30, 2025, down from $6,421,822 in the same period of 2024. Expenses, however, saw a dramatic reduction to $523,109 from $5,213,568, largely due to a negative capital gains incentive fee of $1,565,000. Cash increased significantly to $9,490,747 as of September 30, 2025, from $834,805 at December 31, 2024, primarily from operating activities. The company's total investments at fair value decreased from $70,818,041 to $44,330,872, reflecting the realized and unrealized losses. Net assets per share declined from $25.31 at December 31, 2024, to $18.06 at September 30, 2025.

Why It Matters

RAND Capital's substantial decline in net assets and investment fair value signals a challenging period for investors, reflecting potential difficulties in its portfolio companies or broader market headwinds impacting its private equity holdings. The significant unrealized depreciation of $11,812,832 suggests that the fair value of its investments has deteriorated, which could lead to further realized losses if these positions are exited. This performance contrasts sharply with the prior year's gains, indicating a shift in the company's investment landscape and potentially impacting its ability to generate future returns and distribute dividends. Competitors in the BDC space might be navigating similar pressures, but the magnitude of RAND's decline warrants close attention from the market.

Risk Assessment

Risk Level: high — The company experienced a net decrease in net assets from operations of $9,125,901 for the nine months ended September 30, 2025, compared to an increase of $11,773,670 in the prior year. This is primarily due to a net realized loss of $2,001,997 and a significant net change in unrealized depreciation on investments of $11,812,832, indicating substantial portfolio value erosion.

Analyst Insight

Investors should consider reducing their exposure to RAND Capital given the significant decline in net assets and investment fair value. A thorough review of the underlying portfolio companies and the broader economic outlook for private investments is warranted before making any new commitments.

Financial Highlights

debt To Equity
0.02
revenue
$5,189,824
operating Margin
N/A
total Assets
$54,579,788
total Debt
$958,274
net Income
-$9,125,901
eps
N/A
gross Margin
N/A
cash Position
$9,490,747
revenue Growth
-19.2%

Revenue Breakdown

SegmentRevenueGrowth
Interest from control investments$4,616,862-91.6%
Interest from affiliate investments$3,724,896+5.7%
Interest from non-control/non-affiliate investments$865,570-48.5%
Total investment income$5,189,824-19.2%

Key Numbers

Key Players & Entities

FAQ

What caused the significant decrease in RAND Capital's net assets?

The significant decrease in RAND Capital's net assets was primarily caused by a net realized loss on sales and dispositions of investments of $2,001,997 and a substantial net change in unrealized depreciation on investments of $11,812,832 for the nine months ended September 30, 2025.

How did RAND Capital's investment income change year-over-year?

RAND Capital's total investment income decreased to $5,189,824 for the nine months ended September 30, 2025, down from $6,421,822 in the same period of 2024, representing a decline of approximately 19.2%.

What is RAND Capital's current cash position?

As of September 30, 2025, RAND Capital's cash balance significantly increased to $9,490,747, up from $834,805 at December 31, 2024, primarily due to net cash provided by operating activities.

What is the fair value of RAND Capital's total investments?

The fair value of RAND Capital's total investments as of September 30, 2025, was $44,330,872, a notable decrease from $70,818,041 as of December 31, 2024.

How has RAND Capital's net assets per share been affected?

RAND Capital's net assets per share decreased from $25.31 at December 31, 2024, to $18.06 at September 30, 2025, reflecting the overall decline in net assets.

What was the impact of capital gains incentive fees on RAND Capital's expenses?

Capital gains incentive fees had a significant impact, showing a negative $1,565,000 for the nine months ended September 30, 2025, which contributed to the overall reduction in total expenses to $523,109 from $5,213,568 in the prior year.

Are RAND Capital's securities restricted?

Yes, as of September 30, 2025, restricted securities represented 100% of the fair value of RAND Capital's investment portfolio, meaning they are subject to resale restrictions and are not freely marketable.

What is the current number of RAND Capital's common stock shares outstanding?

As of November 7, 2025, there were 2,969,814 shares of RAND Capital's common stock outstanding.

What types of investments does RAND Capital hold?

RAND Capital holds Control investments, Affiliate investments, and Non-Control/Non-Affiliate investments. As of September 30, 2025, Affiliate investments constituted 61.8% of net assets, Non-Control/Non-Affiliate investments 17.1%, and Control investments 3.7%.

How did RAND Capital's total liabilities change?

RAND Capital's total liabilities decreased significantly from $7,124,913 as of December 31, 2024, to $958,274 as of September 30, 2025, largely due to the elimination of the line of credit and capital gains incentive fees payable.

Risk Factors

Industry Context

RAND Capital Corp. operates within the Business Development Company (BDC) sector, which focuses on providing capital to small and medium-sized businesses. The industry is sensitive to interest rate changes, economic cycles, and the overall health of the companies in which BDCs invest. Many BDCs aim to generate income through interest and dividends, and capital appreciation from their investments.

Regulatory Implications

As a BDC, RAND Capital is subject to regulations by the Securities and Exchange Commission (SEC), including requirements for asset coverage, reporting, and shareholder protections. Changes in accounting standards or regulatory interpretations could impact how investments are valued and reported, affecting net asset value and profitability.

What Investors Should Do

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Key Dates

Glossary

Net assets from operations
The change in the company's net worth resulting from its core business activities, including investment income, realized and unrealized gains/losses, and operating expenses. (A key indicator of the company's profitability and performance over a period. A significant decrease signals financial distress.)
Unrealized depreciation
A decrease in the fair value of an investment that has not yet been sold. It represents a paper loss. (Directly impacts the reported value of the company's investment portfolio and its net asset value.)
Realized loss
A loss incurred when an investment is sold for less than its purchase price or carrying value. (Represents an actual loss of capital that reduces the company's assets.)
Capital gains incentive fee
A performance-based fee paid to an investment advisor, typically calculated as a percentage of realized capital gains. (A negative fee indicates a reversal or adjustment, likely due to realized losses or a change in calculation methodology, impacting reported expenses.)
Business Development Company (BDC)
A type of closed-end investment company that invests in small and medium-sized businesses and may provide managerial assistance. BDCs are regulated by the SEC. (RAND Capital Corp. operates as a BDC, meaning its financial performance is heavily influenced by the performance of its portfolio companies and market conditions.)

Year-Over-Year Comparison

RAND Capital Corp. has experienced a significant downturn in performance compared to the prior year. For the nine months ended September 30, 2025, net assets from operations decreased by $9.1M, a stark reversal from a $11.8M increase in the prior year. This was driven by a substantial $11.8M in unrealized depreciation and a $2.0M realized loss on investments. Total investment income also fell by 19.2% to $5.2M. While total expenses saw a dramatic reduction to $0.5M from $5.2M, largely due to a negative capital gains incentive fee, the overall financial picture is bearish, reflected in the decline of net assets per share from $25.31 to $18.06.

Filing Stats: 4,228 words · 17 min read · ~14 pages · Grade level 10.9 · Accepted 2025-11-07 08:45:59

Key Financial Figures

Filing Documents

– FINANCIAL INFORMATION

PART I. – FINANCIAL INFORMATION Item 1.

Financial Statements and Supplementary Data

Financial Statements and Supplementary Data 1 Consolidated Statements of Financial Position as of September 30, 2025 (Unaudited) and December 31, 2024 1 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited) 2 Consolidated Statements of Changes in Net Assets for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited) 3 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 4 Consolidated Schedule of Portfolio Investments as of September 30, 2025 (Unaudited) 5 Consolidated Schedule of Portfolio Investments as of December 31, 2024 12 Notes to the Consolidated Financial Statements (Unaudited) 20 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 37 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 48 Item 4.

Controls and Procedures

Controls and Procedures 49

– OTHER INFORMATION

PART II. – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 50 Item 1A.

Risk Factors

Risk Factors 50 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 50 Item 3. Defaults upon Senior Securities 50 Item 4. Mine Safety Disclosures 50 Item 5. Other Information 50 Item 6. Exhibits 51 Table of Contents

FINANC IAL INFORMATION

PART I. FINANC IAL INFORMATION

Financial Statem ents and Supplementary Data

Item 1. Financial Statem ents and Supplementary Data RAND CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEME NTS OF FINANCIAL POSITION September 30, 2025 (Unaudited) December 31, 2024 ASSETS Investments at fair value: Control investments (cost of $ 6,563,940 and $ 6,188,940 , respectively) $ 2,000,000 $ 2,500,000 Affiliate investments (cost of $ 37,470,374 and $ 42,488,804 , respectively) 33,155,868 51,668,144 Non-Control/Non-Affiliate investments (cost of $ 9,501,053 and $ 19,442,491 , respectively) 9,175,004 16,649,897 Total investments, at fair value (cost of $ 53,535,367 and $ 68,120,235 , respectively) 44,330,872 70,818,041 Cash 9,490,747 834,805 Interest receivable (net of allowance of $ 25,337 and $ 0 , respectively) 183,737 357,530 Prepaid income taxes 343,689 329,365 Deferred tax asset, net 116,889 2,161 Other assets 113,854 115,531 Total assets $ 54,579,788 $ 72,457,433 LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS) Liabilities: Due to investment adviser $ 527,225 $ 2,182,846 Accounts payable and accrued expenses 64,976 92,568 Line of credit (see Note 6) — 600,000 Capital gains incentive fees — 1,565,000 Deferred revenue 366,073 516,441 Dividend payable — 2,168,058 Total liabilities 958,274 7,124,913 Commitments and contingencies (see Note 5) Stockholders' equity (net assets): Common stock, $ 0.10 par; shares authorized 100,000,000 ; shares issued: 3,037,709 at 9/30/25 and 2,648,916 at 12/31/24; shares outstanding: 2,969,814 at 9/30/25 and 2,581,021 at 12/31/24 (see Note 1) 303,771 264,892 Capital in excess of par value 64,051,504 55,419,620 Stock dividends distributable: 0 shares at 9/30/25 and 388,793 shares at 12/31/24 — 8,672,231 Treasury stock, at cost: 67,895 shares at 9/30/25 and 12/31/24 ( 1,566,605 ) ( 1,566,605 ) Total distributable earnings ( 9,167,156 ) 2,542,382 T

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