NexPoint Capital's Net Assets Plunge 12% Amid Investment Losses

TL;DR

**NexPoint Capital is bleeding value, with net assets down 12% and big investment losses – time to re-evaluate your position.**

AI Summary

NexPoint Capital, Inc. experienced a significant decrease in total net assets, falling from $45,276,270 at December 31, 2024, to $39,900,195 at September 30, 2025, a decline of 11.9%. This was primarily driven by a net decrease in net assets from operations of $1,822,531 for the nine months ended September 30, 2025, compared to a net increase of $3,278,659 for the same period in 2024. The company reported a net investment income of $673,771 for the nine months ended September 30, 2025, a substantial improvement from a net investment loss of $78,642 in the prior year. However, net realized and unrealized losses on investments totaled $2,496,302 for the nine months ended September 30, 2025, a sharp reversal from gains of $3,357,301 in 2024. Cash and cash equivalents decreased from $1,671,503 at the beginning of the period to $937,319 by September 30, 2025. Distributions to stockholders for the nine months ended September 30, 2025, amounted to $2,295,211, with $0.27 per share distributed.

Why It Matters

This filing reveals a challenging period for NexPoint Capital, Inc., with a significant drop in net assets and substantial realized and unrealized investment losses. For investors, this indicates potential erosion of capital and raises questions about the company's investment strategy and portfolio performance, especially compared to its peers in the BDC space. Employees might face uncertainty if these trends continue, impacting future growth prospects. Customers, particularly those invested in NexPoint's funds, are directly affected by the declining net asset value per share, which fell from $5.21 to $4.73. The broader market may view this as a signal of potential volatility in certain alternative investment sectors, particularly those with significant Level 3 fair-valued assets.

Risk Assessment

Risk Level: high — The company's net assets decreased by 11.9% from $45,276,270 to $39,900,195 in nine months, and it reported net realized and unrealized losses of $2,496,302 for the nine months ended September 30, 2025. Furthermore, 91.1% of net assets ($36,361,244) are fair valued using Level 3 inputs, indicating significant reliance on unobservable inputs and subjective valuations, which inherently carries higher risk.

Analyst Insight

Investors should scrutinize NexPoint Capital's investment portfolio, particularly the 91.1% of assets valued using Level 3 inputs, and understand the underlying assumptions. Given the significant decline in net assets and realized/unrealized losses, consider reducing exposure or reallocating capital to less volatile or more transparent investment vehicles.

Financial Highlights

debt To Equity

N/A

revenue

$1,676,779

operating Margin

N/A

total Assets

$41,278,601

total Debt

$1,378,406

net Income

$-1,822,531

eps

$-0.22

gross Margin

N/A

cash Position

$937,319

revenue Growth

18.5%

Revenue Breakdown

Key Numbers

• $39.90B — Total Net Assets (Decreased by 11.9% from $45.28B at Dec 31, 2024 to $39.90B at Sep 30, 2025)
• $1.82M — Net decrease in net assets from operations (For the nine months ended Sep 30, 2025, a reversal from a $3.28M increase in 2024)
• $673.77K — Net investment income (For the nine months ended Sep 30, 2025, a significant improvement from a $78.64K loss in 2024)
• $2.50M — Net realized and unrealized losses on investments (For the nine months ended Sep 30, 2025, a reversal from $3.36M gains in 2024)
• $4.73 — Net asset value per share of common stock (Decreased from $5.21 at Dec 31, 2024)
• 91.1% — Percentage of net assets fair valued using Level 3 inputs (Represents $36,361,244 of total investments, indicating high valuation subjectivity)
• $2.30M — Distributions to stockholders (For the nine months ended Sep 30, 2025)
• $0.27 — Distributions to stockholders per share (For the nine months ended Sep 30, 2025)
• $937.32K — Cash and cash equivalents (Decreased from $1,671,503 at Dec 31, 2024)
• 8,435,643 — Shares of common stock outstanding (As of September 30, 2025, down from 8,695,640 shares at Dec 31, 2024)

Key Players & Entities

• NexPoint Capital, Inc. (company) — registrant
• Adviser (company) — related party to NexPoint Capital, Inc.
• Carestream Health, Inc. (company) — portfolio company
• CCS Medical, Inc (company) — portfolio company
• MidWave Wireless, Inc. (company) — portfolio company
• iHeartCommunications, Inc. (company) — portfolio company
• PlantSwitch, Inc. (company) — portfolio company
• NexPoint Real Estate Finance, Inc. (company) — affiliated portfolio company
• NexPoint Residential Trust, Inc. (company) — affiliated portfolio company
• NexPoint Capital REIT, LLC (company) — affiliated portfolio company

FAQ

Risk Factors

• Declining Net Asset Value [high — financial]: Total net assets decreased by 11.9% from $45,276,270 to $39,900,195 over nine months. This decline was driven by a net decrease in net assets from operations of $1,822,531 and significant net realized and unrealized losses on investments totaling $2,496,302.
• Investment Performance Reversal [high — financial]: The company experienced a sharp reversal in investment performance, moving from net realized and unrealized gains of $3,357,301 in the nine months ended September 30, 2024, to net losses of $2,496,302 in the same period of 2025. This indicates a significant deterioration in the value of the company's investment portfolio.
• Decreasing Cash Position [medium — financial]: Cash and cash equivalents have fallen from $1,671,503 at the start of the period to $937,319 by September 30, 2025. This reduction in liquidity could impact the company's ability to meet short-term obligations or pursue new investment opportunities.
• High Valuation Subjectivity [high — financial]: 91.1% of total investments, representing $36,361,244, are fair valued using Level 3 inputs. This high percentage indicates significant subjectivity in valuation, increasing the risk of inaccurate asset valuation and potential future write-downs.
• Reduced Shares Outstanding [medium — financial]: The number of common shares outstanding decreased from 8,695,640 at December 31, 2024, to 8,435,643 at September 30, 2025. While this can sometimes be a result of share buybacks, in conjunction with declining NAV, it warrants further investigation into capital management strategies.
• Distributions Exceeding Net Investment Income [high — financial]: Distributions to stockholders for the nine months ended September 30, 2025, totaled $2,295,211. This amount significantly exceeds the net investment income of $673,771 for the same period, suggesting that distributions may be funded by return of capital or liquidation of assets.
• Related Party Transactions [medium — operational]: The company engages in transactions with its Adviser, including advisory fees and receivables/payables. While common in the industry, these related-party transactions require careful scrutiny to ensure they are conducted at arm's length and in the best interest of shareholders.
• Accumulated Deficit [high — financial]: The company has a distributable earnings (accumulated loss) of ($36,034,155) as of September 30, 2025. This substantial accumulated loss indicates a history of net losses or distributions exceeding earnings.

Industry Context

NexPoint Capital operates within the alternative investment management sector, which is characterized by diverse strategies and a focus on generating alpha for investors. The industry is competitive, with firms often specializing in specific asset classes or strategies, such as credit, real estate, or private equity. Recent trends include increased investor demand for yield-oriented strategies and a growing emphasis on ESG (Environmental, Social, and Governance) factors. However, the current macroeconomic environment, marked by rising interest rates and economic uncertainty, presents challenges for valuation and performance across the sector.

Regulatory Implications

As a publicly traded investment company, NexPoint Capital is subject to regulations from the Securities and Exchange Commission (SEC), including requirements for financial reporting and disclosure. The significant use of Level 3 inputs for valuation highlights a potential area of regulatory scrutiny, as it necessitates robust internal controls and transparent disclosure of valuation methodologies to ensure fair value reporting.

What Investors Should Do

1. Scrutinize valuation methodologies for Level 3 assets.
2. Analyze the sustainability of current distributions.
3. Investigate the drivers of investment losses.
4. Monitor cash flow and liquidity.
5. Evaluate the impact of related-party transactions.

Key Dates

• 2025-09-30: End of Nine-Month Period — Reporting period for the consolidated statements of assets and liabilities and operations, showing a decrease in net assets and significant investment losses.
• 2025-09-30: Net Asset Value per Share — NAV per share stood at $4.73, down from $5.21 at the end of the previous fiscal year, reflecting the decline in the company's asset value.
• 2025-09-30: Cash and Cash Equivalents — Company held $937,319 in cash, a decrease from $1,671,503 at the end of the prior fiscal year, indicating reduced liquidity.
• 2024-12-31: End of Fiscal Year — Previous reporting period where total net assets were $45,276,270 and NAV per share was $5.21.

Glossary

Level 3 inputs

Unobservable inputs used in the valuation of assets and liabilities. These are typically based on the company's own assumptions and are used when market prices are not readily available. (A high percentage of Level 3 inputs (91.1%) for investments indicates significant valuation subjectivity and potential risk for NexPoint Capital.)

Interest paid-in-kind

Interest that is not paid in cash but is instead added to the principal amount of a loan or debt instrument. (This form of interest income is recognized by NexPoint Capital, contributing to its investment income, and increased slightly in the nine-month period of 2025.)

Distributable earnings (accumulated loss)

The cumulative net income or loss of a company since its inception, less any distributions made to shareholders. (NexPoint Capital has a significant accumulated loss of ($36,034,155) as of September 30, 2025, indicating that losses and/or distributions have exceeded earnings.)

Net asset value per share

The value of a company's assets minus its liabilities, divided by the number of outstanding shares. (The NAV per share for NexPoint Capital decreased from $5.21 to $4.73, reflecting the decline in the company's overall net assets.)

Unaffiliated investments

Investments in companies or entities where NexPoint Capital does not have a controlling interest or significant influence. (The fair value of unaffiliated investments decreased from $35,244,976 to $32,845,396, contributing to the overall decline in assets.)

Affiliated investments

Investments in companies or entities where NexPoint Capital has a controlling interest or significant influence. (The fair value of affiliated investments decreased from $9,282,151 to $7,247,955, also contributing to the decline in total assets.)

Net investment income

The income generated from a company's investments after deducting investment-related expenses. (NexPoint Capital reported net investment income of $673,771 for the nine months ended September 30, 2025, an improvement from a net investment loss in the prior year.)

Net realized and unrealized losses on investments

Losses incurred from the sale of investments (realized) and the decrease in the market value of investments still held (unrealized). (These losses totaled $2,496,302 for the nine months ended September 30, 2025, a significant negative factor impacting the company's net assets.)

Year-Over-Year Comparison

Compared to the prior fiscal year-end (December 31, 2024), NexPoint Capital has experienced a significant decline in its financial standing. Total net assets have fallen by 11.9% to $39.90 million, driven by a substantial swing from investment gains to losses totaling $2.50 million in the nine-month period. While net investment income improved to $673.77 thousand, it was insufficient to offset the investment losses and operational decreases, leading to a net decrease in assets from operations. Furthermore, the company's cash position has weakened, decreasing by approximately 44% to $937.32 thousand, and the net asset value per share has dropped from $5.21 to $4.73.

Key Financial Figures

• $0.001 — g) of the Act: Common Stock, par value $0.001 per share Indicate by check mark whet

Filing Documents

• d74823d10q.htm (10-Q) — 2618KB
• d74823dex311.htm (EX-31.1) — 7KB
• d74823dex312.htm (EX-31.2) — 7KB
• d74823dex321.htm (EX-32.1) — 5KB
• 0001193125-25-282550.txt ( ) — 11466KB
• cik0001588272-20250930.xsd (EX-101.SCH) — 1324KB
• d74823d10q_htm.xml (XML) — 2856KB

– Financial Information

Part I – Financial Information Item1.

Financial Statements

Financial Statements NexPoint Capital, Inc. Consolidated Statements of Assets and Liabilities September 30, 2025 (Unaudited) December 31, 2024 Assets Unaffiliated investments, at fair value (cost of $ 27,786,720 and $ 28,672,769 , respectively) $ 32,845,396 $ 35,244,976 Affiliated investments, at fair value (cost of $ 9,325,427 and $ 10,555,992 , respectively) (1) 7,247,955 9,282,151 Cash and cash equivalents 937,319 1,671,503 Dividends and interest receivable 26,774 171,456 Receivable from Adviser (2) 140,805 149,659 Prepaid expenses 6,346 537 Deferred tax asset (3) 74,006 33,582 Other receivables — 22,137 Total assets 41,278,601 46,576,001 Liabilities Payable for fund shares repurchased — 922 Payable to Adviser (2) 218,871 312,204 Accrued expenses and other liabilities 332,050 135,720 Distributions payable 759,208 782,608 Deferred tax liability (3) 68,277 68,277 Total liabilities 1,378,406 1,299,731 Commitments and contingencies (4) Net assets Preferred stock, $ 0.001 par value ( 25,000,000 shares authorized, 0 shares issued and outstanding) — — Common stock, $ 0.001 par value ( 200,000,000 shares authorized, 8,435,643 and 8,695,640 shares issued and outstanding, respectively) 8,436 8,696 Paid-in capital in excess of par 75,925,914 77,183,987 Distributable earnings (accumulated loss) ( 36,034,155 ) ( 31,916,413 ) Total net assets $ 39,900,195 $ 45,276,270 Net asset value per share of common stock $ 4.73 $ 5.21 (1) See Note 9 for a discussion of affiliated investments. (2) See Note 4 for a discussion of related party transactions and arrangements. (3) See Note 5 for a discussion of the deferred tax asset/liability. (4) See Note 4 and Note 7 for a discussion of the commitments and contingencies of the Company (as defined in Note 1). See Notes to Consolidated Financial Statements. 1 Table of Contents NexPoint Capital, Inc

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