Hercules Capital Faces Securities Class Action Over Alleged Copying of Google Ventures Deal Sourcing and NAV Overstatement

Hercules Capital, Inc. (HTGC) is facing a securities class action alleging that the business development company misstated or overstated aspects of its investment origination, underwriting, portfolio valuation, and related disclosures. The complaint centers on whether Hercules’ reported due diligence and portfolio marks—including its net asset value (NAV)—were accurate.

Allegations at the center of the case

The lawsuit focuses on the propriety of Hercules’ disclosures regarding its investment origination and underwriting processes. According to the complaint, Hercules overstated the due diligence used in sourcing deals and underwriting loans, overstated the due diligence used in portfolio valuation, and misclassified certain portfolio investments.

As a result, the complaint alleges that Hercules overstated or misrepresented portfolio valuations and NAV.

Hunterbrook report raises questions

Hercules’ prior assurances about its origination and due diligence processes were brought into question on February 27, 2026, after Hunterbrook published findings.

Hunterbrook characterized Hercules’ deal sourcing process as largely derivative, asserting that it amounted to reviewing investments made by Google Ventures and copying those approaches. Hunterbrook also argued that Hercules is among the most software-exposed BDCs, estimating that about 35% of the value of Hercules’ loan portfolio is tied to software.

Hunterbrook further claimed that, despite billions of dollars of similar industry debt falling into distressed territory, Hercules continues to mark its software book at 100 cents on the dollar.

Claims involving PIK loans and income

Hunterbrook also alleged that an increasing share of Hercules’ income is “phantom,” citing the company’s growing use of payment-in-kind (PIK) loans. Under this structure, the borrower pays interest by adding to the principal of its debt rather than paying interest in cash.

Valuation process concerns

In addition, Hunterbrook said it spoke with a former member of Hercules’ finance team. The individual reportedly provided information that raised concerns about Hercules’ valuation process, including that the team was small and overstretched and that there were few checks in place compared with other BDCs.

Market reaction

The news drove the price of Hercules shares down nearly 8% on February 27, 2026.

Firm statement and investigation

Hagens Berman partner Reed Kathrein, who is leading the firm’s investigation, said: “We’re investigating Hunterbrook’s allegations and, if true, whether Hercules misled investors about its sourcing, underwriting, marks, PIKs, and ultimately its NAV.”

Whistleblower and investor information

The firm said persons with non-public information regarding Hercules should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. It noted that under the program, whistleblowers who provide original information may receive rewards totaling up to 30% of any successful recovery made by the SEC.

For information, the firm provided contact details for Reed Kathrein at 844-916-0895 and an email address at [email protected].

About Hagens Berman

Hagens Berman described itself as a global plaintiffs’ rights complex litigation firm focused on corporate accountability. The firm said its team has secured more than $2.9 billion in this area of law and that more information is available at hbsslaw.com.