Hercules Capital faces securities class action over alleged misstatements in investment origination and portfolio valuations

Hercules Capital (NYSE: HTGC) is facing a securities class action lawsuit seeking to represent investors who purchased or otherwise acquired Hercules securities between May 1, 2025 and February 27, 2026. The case follows a critical report by Hunterbrook Media titled “The Myth of Hercules Capital,” which alleges issues with Hercules’ deal sourcing and related disclosures.

Allegations and focus of the lawsuit

The complaint centers on the propriety of Hercules’ disclosures regarding its investment origination and underwriting processes. Hercules previously assured investors about the robustness of its origination process for sourcing potential investments and the effectiveness of its due diligence before underwriting investments.

According to the allegations described in the filing, Hercules overstated the due diligence used in its deal sourcing and loan origination process, overstated due diligence in its portfolio valuation process, and misclassified portfolio investments. The lawsuit claims these issues led Hercules to overstate or misrepresent portfolio valuations and its net asset value (NAV).

Hunterbrook’s report and market reaction

The developments were brought into question on February 27, 2026, when Hunterbrook published its findings. Hunterbrook alleged, in part, that “according to a former Hercules analyst who worked on deal sourcing” Hercules’ deal sourcing process amounted to checking what Google Ventures invests in and copying those investments.

Hunterbrook also characterized Hercules as one of the most software-exposed business development companies (BDCs), stating that “about 35% of the value of the company’s loan portfolio” is tied to software exposure. It further alleged that, despite billions of dollars of similar industry debt falling into distressed territory, Hercules “still marks its software book at 100 cents on the dollar.”

In addition, Hunterbrook said an increasing share of Hercules’ income is “phantom,” attributing this to the company’s growing use of payment-in-kind (PIK) loans, which allow borrowers to pay interest by adding to the principal rather than paying interest on the debt.

The report also referenced information from a former member of Hercules’ finance team, who reportedly provided details that Hunterbrook said raised concerns about the valuation process. Hunterbrook attributed the concern to the team being small and overstretched, with few checks in place.

Following the report, Hercules shares fell nearly 8% on February 27, 2026.

Lead plaintiff deadline and next steps

The class period is May 1, 2025 through February 27, 2026. The lead plaintiff deadline is May 19, 2026.

Hagens Berman, the national shareholders rights firm leading the investigation, said it is investigating whether Hercules misled investors about sourcing, underwriting, marks, PIKs, and NAV.

Whistleblower information

The firm also encouraged potential whistleblowers with non-public information to consider their options, including the SEC Whistleblower program. Under the program, whistleblowers who provide original information may receive rewards totaling up to 30% of any successful recovery made by the SEC.

Firm background

Hagens Berman describes itself as a global plaintiffs’ rights complex litigation firm focused on corporate accountability. The firm states that its team has secured more than $2.9 billion in this area of law.